Warren Buffett made billions buying undervalued companies before market sentiment swung back in their favor. Legendary sandalwood bandit and handlebar mustache-extraordinaire Veerappan made his personal fortune by staying one step ahead of the law. And our Motley Fool Hidden Gems newsletter -- headed by Fool co-founder Tom Gardner -- is currently beating the market by 25 points with its recommendations of small-cap companies that haven't yet registered on Wall Street's radar.
With these examples in mind, I used our new CAPS screening tool to find the stocks poised for big gains -- before Wall Street catches on.
They have:
- Trailing three-year earnings growth of at least 10%.
- Market capitalizations of at least $1 billion.
- Four- or five-star ratings in CAPS, up from one, two, or three stars at the beginning of 2008.
Remember, in the first year for which we have data, four-star stocks like Aluminum Corp. of China (NYSE: ACH) (up 311% during that year) yielded on average more than 19% returns. Five-star stocks did even better.
|
Company |
Share Price |
Sector |
Market Cap (billions) |
|---|---|---|---|
|
CNET |
$7.70 |
Technology |
$1.1 |
|
Coach |
$36.04 |
Consumer goods |
$12.5 |
|
Dick's Sporting Goods |
$29.47 |
Services |
$3.3 |
|
DuPont (NYSE: DD) |
$48.94 |
Basic materials |
$44.1 |
|
FedEx (NYSE: FDX) |
$98.65 |
Services |
$30.6 |
|
Moody's |
$38.59 |
Financial |
$9.4 |
|
Prudential (NYSE: PRU) |
$77.28 |
Financial |
$34.5 |
|
QUALCOMM (Nasdaq: QCOM) |
$44.36 |
Technology |
$71.8 |
|
VMware (NYSE: VMW) |
$70.24 |
Technology |
$30.0 |
|
WellCare Health Plans (NYSE: WCG) |
$43.01 |
Health Care |
$1.8 |
Come and join us on Motley Fool CAPS to dig into these companies further. Let our 100,000-person-strong (and counting) CAPS community help you stay a step ahead.
Or, if you'd like to check out the official list of Hidden Gems recommendations that have been crushing the market (along with our rationale for each pick), you can click here for a free 30-day trial.
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