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
On Motley Fool CAPS, these opportunities can be found among our four-star stocks. In CAPS' proprietary ratings system, they rank higher than most of the other 5,300 rated companies, but they're just shy of superstardom. While all the attention might be focused on their five-star peers, we can sift through CAPS to find four-star companies approaching greatness. Here are a handful:
- Barrick Gold (NYSE:ABX)
- E*Trade Financial (NASDAQ:ETFC)
- Hecla Mining (NYSE:HL)
- Pfizer (NYSE:PFE)
- Sunrise Senior Living (NYSE:SRZ)
Some of these names might surprise you. Pfizer, for example, is an industry leader with some of the top-selling drugs to its name. 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 130,000-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?
The dollar closed May at its lowest levels of the year, as weakness continues to badger the currency. Treasury Secretary Timothy Geithner had to reassure China -- this country's biggest creditor -- that its dollar assets are still OK while hoping that China will keep on buying greenbacks and stop pushing for an alternative reserve currency.
Recently, the dollar's weakness has been precious metals' strength. Gold increased 10% in value during May, and silver experienced its biggest gain since 1987, jumping 27%. Yet precious metals aren't the only assets that are on the move: Many commodities are rising substantially. Oil, as we know all too well, is gaining ground again, with deliveries for July ending last week at more than $66 a barrel. Copper is up 63% year to date, cotton has risen 18%, and manufacturers are said to be replenishing inventories of all sorts of basics, from plywood to chemicals.
That trend is evident among some companies. Specialty chemical maker Huntsman (NYSE:HUN) says some of its customers have depleted their inventories and are looking to stockpile again, while even for struggling aluminum producer Alcoa (NYSE:AA), conditions are improving in its markets.
With all these supposed "green shoots" appearing, it's not surprising that investors are looking to mining stocks. CAPS member SunJosh expects the dollar's decline to help miners like Barrick Gold.
Commodities in general have a genuine supply demand imbalance, which will last over the next 4-5 years, as adding capacity is a very slow process. With the dollar expected to depreciate significantly once the US Government starts to monetize its debt, gold is expected to move up. This stock is a good way to leverage on the gold upswing.
Similarly, some analysts say the time is ripe for gold prices to rise, which would in turn pay off for the miners, perhaps furthering their reputation as the ultimate safe haven. At least one is seeing the potential for gold to triple in value to more than $3,500 an ounce by next year. Because of a number of factors, gold bulls believe investors have good reason to include gold as part of a balanced investment portfolio.
A great opportunity for you
These four-star investments seem to 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.
