Some companies are obviously great investments -- in hindsight. Yet for every stock out there screaming "buy me," others simply give us a nudge and a nod. How can we tell tomorrow's obviously great investments from the thousands of pretenders?
The stars' walk of fame
The data shows that stocks achieving five-star ratings on Motley Fool CAPS have outperformed the market by 12 percentage points on average, and that newly minted five-star stocks represent your best opportunity to capture those returns. So let's sift through CAPS' proprietary ratings system and find the stocks most likely headed toward superstardom. Here are a handful of four-star firms approaching greatness.
Atlas Pipeline Partners
Eagle Bulk Shipping
Northstar Realty Finance
United States Steel
Some of these names might surprise you. United States Steel, once synonymous with the aging Rust Belt, had been burnishing its reputation until the collapse in commodity prices last year. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. The 125,000-plus CAPS members chose these companies as less obvious sources for tomorrow's great buys. Let's see why they might merit your attention.
In the sight of greatness
With a new administration expected to lift the ban on stem cell research, companies like StemCells seek to reap the windfall that will hopefully follow. But with the rewards comes the potential for greater competition, such as Pfizer's
CAPS member KittyLitterClump understands the speculative nature of an investment here, but believes stem cell research has the potential to change lives for the better by treating specific diseases: "This is a pure 'I hope it does well' pick. But it still has funding and is having positive feedback regarding it's Batten Disease and Liver Program."
Commercial mortgage REIT Northstar Realty Finance has suffered because of its reliance upon access to the capital markets for funding. But by diversifying its revenue stream, Northstar handily beat analyst expectations at the end of the third quarter. The company reported funds from operations of $26.6 million, or $0.38 per share, well ahead of forecasts of just $0.32 per share. Funds from operations, or FFO, is a key financial measurement for REITs, because it gives a more accurate picture of cash performance.
What am I missing here? 32% dividend at 4.8$per share. Also they have tons of cash on hand for investments and share buyback. Their next significant debt comes due in october of 2010. Are people betting on a commercial real estate melt down?? why is this a three star stock? seems too good to be true...
As global trade continues to drop, dry bulk shippers like Eagle Bulk Shippers and Excel Maritime
Recent P&F on the [Baltic Dry Index] gives me hope its loosening up. At these far-depressed levels, I have more confidence in smaller handymax ships than I do capesize, as they are far more flexible and offer more opportunties of use than panamax and capesizes.
A great opportunity for you
These four-star investments could be on their way to five-star greatness and it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.
Sign up today for the completely free service, and let us hear what you have to say about the great and almost-great companies that interest you.