5 Stocks Approaching Greatness

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, annualized. Newly minted five-star stocks represent your best opportunity to capture those returns. So let's sift through the proprietary ratings system and find those stocks headed toward superstardom. Here are a handful of four-star firms approaching greatness.

• Cirrus Logic (NASDAQ:CRUS)
• Dick's Sporting Goods (NYSE:DKS)
• L-1 Identity Solutions (NYSE:ID)
• TierOne (NASDAQ:TONE)
• Wyeth (NYSE:WYE)

Some of these names might surprise you. With well-known brands like Advil, ChapStik, and Dimetapp cold medicine, pharmaceutical giant Wyeth has been treating our ailments for years. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. The 115,000-plus CAPS investors chose these companies as less obvious sources for tomorrow's great buys, so let's see why they might merit your attention.

No short circuit
Chip maker Cirrus Logic has been flirting with a four-star CAPS rating for weeks now, well ahead of its better-than-expected first-quarter results. Now it sees revenue for the second quarter looking up, too, and investors like CAPS member titan04 think it's easy to understand why:

Cutting edge video and audio chips. Their chips are going to be used in all the greatest and latest pre/pros and most good receivers. Many manufacturers just wating on their new single and industry first dual chips.

Being a good sport
The retail scene hasn't been shooting the lights out recently, and Dick's Sporting Goods is no different. At more than twice the size of privately held Sports Authority, and nearly three times the size of Motley Fool Hidden Gems recommendation Cabela's (NYSE:CAB), Dick's is the biggest gun around in sporting goods. When the economy turns, CAPS member BrianPolino thinks Dick's will lead the way in growth:

In my mind, [Dick's] is the next sporting goods chain like Sports Authority. This is a wild card for me as I like to stay away from retail chains; however, I believe this stock to increase at least 10-15% as soon as the economy turns around.

I've got my Eye-D on you
Getting fake IDs and credentials isn't so simple anymore, thanks to L-1 Identity Solutions. An extension on a contract for U.S. passports helped the identity-security company recently hit analyst expectations. CAPS member savog57 figured a few months ago that we'll probably see more government contracts, thanks to L-1's extensive connections:

Inside track on inevitable biometrics identification contracts with US gov't due to former gov't officials on the board and in management including former director of the CIA. Also many insiders from large defense contractors plus the added bonus of several insiders being from former small companies that were eventually acquired by large defense contractors.

Not tone deaf
After the merger debacle with CapitalSource (NYSE:CSE), the decision to narrow its banking focus to just the country's heartland -- concentrating on just Nebraska, Iowa, and Kansas -- ought to allow TierOne to reduce much of the risk it had with its loan origination offices in Florida, Phoenix, and Raleigh. CAPS member PARKDG believes the turnaround story will become more stable as a result:

This company is in major turnaround of earnings. I believe second quarter finished the majority of loan portfolio charge offs. The Florida portfolio has been sold with no further charges and Las Vegas will be gone soon. They have cut the dividend in half which was smart.

They have a very strong capital position as further evidenced by the fact they just passed FDIC exam with highest rating possible. The area they serve (Nebraska, Kansas, Iowa) is very stable and not having problems around rest of country. Within next two years company will be sold and I believe sooner rather than later.

A great opportunity for you
With these four-star investments on their way to five-star greatness, 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.