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, and 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 heading toward superstardom. Here are a handful of four-star firms approaching greatness.
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AllianceBernstein Income Fund
(NYSE:ACG) -
CF Industries
(NYSE:CF) -
Progress Energy
(NYSE:PGN) -
Stillwater Mining
(NYSE:SWC) -
Taser
(NASDAQ:TASR)
Some of these names might surprise you. Taser, for example, has achieved both fame and notoriety for its less-than-lethal weapon of self-protection, and its name has even passed into our lexicon as a verb. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, the 120,000-plus CAPS members chose these companies as less obvious sources for tomorrow's great buys, so let's see why they might merit your attention.
In the sight of greatness
Closed-end funds have taken a beating lately, along with the rest of the market, but their low prices have not been spurring buyers. According to Morgan Stanley, the discount between an average fund's price and its underlying assets has widened to more than 15%, a huge gap from the typical 4.4% discount that's been seen over the past decade. One Nuveen fund has had as much as a 35% discount to underlying assets. Because such funds usually invest heavily in a lot of debt, investors have been fleeing to the safety of other investments in droves.
AllianceBernstein has nearly half of its portfolio in U.S. Treasuries, though an additional 20% is in mortgages. That's actually a 33% increase from the number of mortgages it held when it released its tally last month, when its assets under management had dropped by nearly 13% to $590 billion.
CAPS members are still getting acquainted with the closed-end fund. This past May, mj1139 said he added AllianceBernstein to his portfolio because of the stability it represented:
Here's a nice income fund I recently added to my IRA portfolio to add a little stability along with income. It pays .05 per share monthly which provides a yield of just over 7 % with very little volatility.
When investors typically consider the impact on mining companies of the implosion of sales at Ford
Along with South Africa, Russia controls 80% of the palladium market -- and therein lies the opportunity for Stillwater, according to CAPS member NWTOGME:
This, is a curious senario. Silver & palladium they say are to cheap now for profitable minning.... [Stillwater Mining] is 50% owned by Russia, who is looking say a little annoyed and pushy recently. The last time this supply was cut around 98 or 2000 Ford drove the price to $1,100 plus. This seems unlikely but unless demand justifies price and supply, This fool thinks Palladium will outperform maybe only for a flash, gold going away.
A great opportunity for you
These four-star investments are on their way to five-star greatness, and it pays to start your own research 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.
