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, you can find these opportunities among our four-star stocks. In CAPS' proprietary ratings system, they rank higher than most of the other 5,300 starred companies, but they're just shy of superstardom. While their five-star peers get all of the attention, we can sift through CAPS to find the four-star companies approaching greatness. Here are a handful of them.
Satyam Computer Services
Some of these names might surprise you. Insurance giant Aetna, for example, is an industry leader that's been providing health-care benefits for years. But even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, our 135,000-plus CAPS members have chosen these companies as less obvious sources for tomorrow's great buys, so let's see why they might merit your attention as well.
In the sight of greatness?
When the Tylenol poisonings hit in the early 1980s, the potential for Johnson & Johnson
It remains to be seen whether Satyam Computer Services can resurrect itself in a similar manner, but it has taken bold, decisive steps to overcome the accounting scandal that rocked not only the IT outsourcer but also other Indian companies that were painted with a broad brush, including Infosys
December may be a month best remembered for frauds becoming unraveled and revealed. High-powered attorney Mark Dreier was accused of stealing nearly $380 million in client funds, and that scandal became a quaint sidebar in the aftermath of Bernie Madoff's breathtaking $50 billion swindle. Amidst the tumult, Satyam Chairman Ramalinga Raju first tried to cover up his own fraud by purchasing two family businesses in an effort to get some assets on the balance sheet, only to finally admit that he had cooked the books for years.
Since then, damage control has been a full-time job. Raju and several directors were jailed, the government appointed a new board, and the task of creating new trust has begun. An orderly sale of a controlling stake in Satyam to Tech Mahindra is under way. And although it lost 23 clients that contributed $70 million in its last reported quarter, more than 200 others contributed new orders totaling $380 million in revenues -- a strong showing that surprised many investors.
Highly rated All-Star CAPS member porcelain808 gave Satyam the benefit of the doubt last month, when noting that the IT outsourcer would probably survive because it still has a "solid business that will work through a financial scandal." Our CAPS member continues: "The company has catered to best-of-class talent in India, helping to attract some of the best IT folks and prevent a modicum of brain drain. A super-friendly work environment and solid business model will help keep Satyam afloat through the worst and then spring them ahead when the dust settles."
Over the past month, the stocks that make up the IT Services tag at CAPS rose by 7%, while those tagged with the India label climbed by more than 22% -- enough to make it one of the highest-performing international tags in IT services. In light of the unaudited results it published, Satyam was up by more than 30% in midday trading today.
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's hear what you have to say about the great -- and almost great -- companies that interest you.