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This Could Be Your Next Big Winner

Be warned: I'm about to ask you a highly personal and potentially uncomfortable question.

But don't worry. In return, I'll give you the details on one stock our top analysts think could be your next big winner -- with no strings attached. All you have to do is keep reading.

Now, for the moment of truth ...
How many stocks in your portfolio are up 400% or more? One? Two? Five?

If you own any, congratulations -- and feel free to sound off in the comment section below. But if the answer is zero, don't sweat it. You're certainly not alone (I'm still a few hundred percent short of my first five-bagger) -- and more importantly, it doesn't mean you're a bad investor.

After all, unless you had the (insert your own noun) to buy a left-for-dead company like Ford at its 2009 lows, or you were (insert your own adjective) enough to buy and hold ultra-innovative, game-changing companies like Apple over the past decade, chances are, you simply haven't had the opportunity to own any really huge winners.

The odds are stacked against you
With the exception of companies like those listed above, the market's biggest winners tend to be companies most investors have never even heard of. If you don't believe me, just have a look at 10 of the top winners of the past 52 weeks ...


52-Week Gain

Market Cap

Wall Street Analysts Covering

inTEST Corp. (Nasdaq: INTT  )


$42 million


Radio One (Nasdaq: ROIAK  )


$218 million


Keryx Biopharmaceuticals


$268 million


General Growth Properties


$4.1 billion


Somaxon Pharmaceuticals


$195 million


Human Genome Sciences


$4.3 billion


Magnum Hunter Resources


$240 million


Comstock Homebuilding Companies (Nasdaq: CHCI  )


$42 million


Commerical Vehicle Group (Nasdaq: CVGI  )


$300 million


Select Comfort (Nasdaq: SCSS  )


$465 million


Sources: Google Finance and Yahoo! Finance. All data as of May 21, 2010.

Granted, each of these companies has a different reason for making the list, but the fact of the matter is that because of their relatively small size, these companies are largely ignored by Wall Street analysts -- meaning there is a much higher chance that the market is misjudging their value.

That's why I call these small, obscure, and overlooked stocks your shot to score big, and why fellow Fool writer Rich Greifner says they're the stocks Warren Buffett wishes he could buy.

Of course, there's one big problem ...
These stocks are small, obscure, and overlooked -- meaning you'll have do some serious digging to find ones worthy of your hard-earned investment dollars. And that's exactly why Motley Fool co-founder Tom Gardner launched our Motley Fool Hidden Gems service back in 2003.

You see, while all the Wall Street analysts and talking heads on CNBC are busy covering behemoths such as AT&T, Intel, and Wells Fargo (all of which have more than 25 analysts currently covering them), our Hidden Gems team is busy using $250,000 of the Fool's own money to buy expertly managed, cash-generating small caps like the ones I'm going to introduce you to now.

This could be your next big winner
As anyone who experienced the great Northeastern blackout of 2003 (which left 45 million people in the dark and cost the U.S. more than $10 billion) knows, our nation's electrical grid is in sad shape -- and getting worse all the time.

In fact, the U.S. Department of Energy estimates that failings in the grid cost our economy as much as $180 billion per year. And although President Obama has already pledged $3.4 billion toward the problem (with private investors agreeing to match that amount), experts estimate that it could cost as much as $1.5 trillion to get it up to speed.

(Getting rich) off the grid
Granted, you've probably never heard of AZZ because it's currently covered by only two Wall Street analysts, but here's what you need to know: This company designs and manufactures specialized parts and equipment for utilities and industrial companies -- things like bus ducts, power distribution enclosures, relay panels, switch gear, and substation services.

And you can bet this division will thrive as the U.S. government begins investing billions -- possibly even trillions -- into rebuilding our power grid. Yet, thanks to the recent downturn in infrastructure spending, AZZ is selling well below what our analysts consider fair value.

Couple that with AZZ's healthy balance sheet (lots of cash, with $100 million in senior notes not payable until 2018) and a solid 2.4% dividend, and you'll begin to see why our Hidden Gems team recently opened a small position.

Two more stocks the Hidden Gems team likes ...
Dynamic Materials (Nasdaq: BOOM  ) is a dominant player in the highly specialized explosive metalworking industry. In fact, it's the biggest company of its kind in both North America and Europe -- and because this is a very hard industry to break into, it's highly unlikely that major competitors will spring up any time soon.

Meanwhile, Prestige Brands (NYSE: PBH  ) has a stable of relatively recession-resistant health-related brands (including Compound W, Comet, Clear Eyes, and Chloraseptic) and a focused strategy, makes a lot of cash, and as our Hidden Gems team puts it, "possesses some delightful hidden assets."

Of course, it would be a major mistake to invest in any of these three stocks based solely on what I've been able to tell you here. That's why I'd like to offer you a free 30-day all-access pass to our Hidden Gems service.

That way you can get in-depth research on AZZ, Dynamic Materials, and Prestige Brands, plus full coverage of every stock in the Hidden Gems real-money portfolio -- including all of their Buy First small-cap stock picks -- and access to all the other valuable features of the members-only website.

Stick with Hidden Gems if you like it -- pay nothing if you don't. To learn more, simply click here.

Austin Edwards owns shares of AT&T and Apple -- and (insert your own adjective) people tend to say he's a real (insert your own noun). Intel is a Motley Fool Inside Value selection. Apple is a Stock Advisor recommendation. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended buying calls on Intel. Dynamic Materials is a Motley Fool Hidden Gems pick. The Motley Fool owns shares of AZZ incorporated, Dynamic Materials, and Prestige Brands. The Motley Fool is investors writing for investors.

Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 24, 2010, at 3:45 PM, uanant wrote:

    hindsight is 20 20, There is no methodology given, to educate the investor. This kind of past analysis anyone can do.

    As one great investor said "Seth Klarman" Said, the past data can not tell you anything about the future market behavior. Other than the fact to whine about "Had I done this, I would have been driving BMW 7 Series"

    In Other words "Had my aunt had balls, she would have been my uncle"

  • Report this Comment On May 24, 2010, at 5:05 PM, BlueDevil05 wrote:

    I find it ridiculous that Select Comfort is on the list. This dog is one of the only 4-time Recs by Hidden Gems and has plummeted from its recommended price of $20+ to its current value. I can't believe MF has the gall to use this stock in one of their advertisements disguised as an article.

  • Report this Comment On May 24, 2010, at 11:40 PM, predfern wrote:

    Where is the moat on AZZ? It sounds like a risky company that could be wiped out by competition from big electronic companies and other small companies. JST has competition problems in China. The smartgrid is a bad idea. It just spends zillions of taxpayer dollars to prop up loser alternative energies that will never be economically viable. We got into this mess thanks to Teddy Roosevelt who socialized the utilities with the result that they had no incentive to innovate. The best solution is the free market.

  • Report this Comment On May 25, 2010, at 11:35 AM, augeor wrote:

    I agree with Bluedeil05 on SCSS. When a stock goes from $25+ to < $1.00, there is opportunity for a big gain but too many of us used the HG recommendation and got in at > $20.

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BOOM $10.58 Up +0.09 +0.86%
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