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 most of 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 of them:
- DuPont (NYSE:DD)
- Dynegy (NYSE:DYN)
- Frontline (NYSE:FRO)
- Popular (NASDAQ:BPOP)
- Yamana Gold (NYSE:AUY)
Some of these names might surprise you. DuPont, for example, has been a scientific force for more than two centuries. 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 145,000-plus CAPS members chose these companies as less obvious sources for tomorrow's great buys, so let's see why a couple of them might merit your attention.
In the sight of greatness?
A stock market crash that has the Dow trading at sharply lower values would indicate there are deep problems in our financial world that need to be resolved. Similarly, Peter Schiff's assertion that gold prices could reach the $5,000-an-ounce level shows these issues might be deeper than Mr. Market acknowledges. Pray that scenario doesn't play out.
Yet even if a worst-case situation does not evolve, there are plenty of signs that it could get ugly enough to keep gold prices high. And that means shares of miners like Yamana Gold could go even higher, too. Recently, the Fool's precious metals guru Chris Barker wondered about the discount the market gave this smooth operator's stock, even though it's about three times more valuable than when he first started calling it undervalued a year ago.
There's more than just a little logic to the argument. When compared with the $371 Barrick Gold (NYSE:ABX) spends to extract an ounce of gold from the ground, Yamana's $79-an-ounce cost indicates elevated gold prices will add substantially to its bottom line.
CAPS member poisenden is on board.
Yamana is a gold company and is going to be a major company in the future. Some estimates say that gold will reach $2,000 an ounce in the next few years, and Yamana will take advantage of it if that happens.
Maybe the economy's not tanking
At the other end of the spectrum, it doesn't take an act of faith to believe that if the world economy does improve, both consumers and businesses will demand more oil. When that happens, expect to see oil shippers like Frontline and Teekay (NYSE:TK) rebound. Right now, there's still an oversupply of oil, and tankers are being used to store oil offshore. In fact, Teekay benefited from having a diverse mix of businesses, as seen in its third-quarter results. In addition to a fleet of 34 shuttle tankers, it also has four floating storage tankers and a direct ownership interest in a fifth. Similarly, Frontline changed the time charter agreement on two of its vessels earlier this year so that they could operate as floating storage units rather than regular tankers.
CAPS member Ak66 writes that Frontline's stock price might be erratic in the near future, but ultimately there will be higher valuations.
This is a speculative play on future volumes and prices of oil. I think it will be very volatile in the next several months but should be a great longer-term play.
Where do you fit in? Is this an opportune time for the oil tanker business? Let us know your position on Frontline's CAPS page.
A great opportunity for you
Investor sentiment suggests these four-star investments still seem to be on their way to five-star greatness, but 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.
