How did Warren Buffett become one of the best investors who's ever lived? Even though he has often downplayed the importance of a stratospheric IQ when it comes to investing, Buffett is one smart cookie. I'm sure he's also had a bit of luck along the way.
But one thing that's always jumped out at me is the man's work ethic, and his extreme dedication to investing. Case in point: In his early years, Buffett claims, he found opportunities by scouring the entire catalogue of publicly traded companies.
Not surprisingly, when asked how individual investors can score the juiciest returns, Buffett has suggested taking the same nose-to-the-grindstone approach. And that's exactly what I've started to do.
Continuing that herculean effort, here are the next four stocks on the list.
|
Company |
Industry |
Market Cap |
Price-to-Earnings Ratio |
Debt-to-Equity Ratio |
Return on Equity |
|---|---|---|---|---|---|
|
LocatePlus Holdings |
Internet software and services |
$5.2 million |
NM |
NM |
NM |
|
China VoIP & Digital Telecom |
Telecom services |
$23.8 million |
NM |
NM |
NM |
|
Nufarm |
Fertilizers and agricultural chemicals |
$1.7 billion |
26.2 |
62.7% |
5.4% |
|
Caterpillar (NYSE: CAT) |
Machinery |
$37.1 billion |
41.5 |
363.2% |
12.1% |
Source: Capital IQ, a Standard & Poor's company. NM = not meaningful.
Now that we've laid out some of the stats, let's take a closer look to figure out which companies are worth our time, and which we can kick to the curb.
The rest
LocatePlus
Google (Nasdaq: GOOG) recently caused some privacy-concern buzz over gaffes with its new Buzz product, but the big G has nothing on LocatePlus when it comes to acting like Big Brother. LocatePlus' website provides personal information such as dates of birth, driver's license numbers, and Social Security numbers for law enforcement, private investigators, insurance companies, and large corporations.
Unfortunately for interested investors, the company is a pretty big train wreck. It has produced positive cash flow only one out of the past five years, and it hasn't been profitable any of those years. In the company's most recent 10-K filing, LocatePlus' auditors expressed doubts about the company's ability to continue as a going concern.
China VoIP & Digital Telecom
Like the U.S.'s Vonage (NYSE: VG), China VoIP offers voice over Internet protocol phone service. However, China VoIP concentrates primarily on the business community. China VoIP also isn't quite as focused as Vonage, and it has its fingers in other pies -- including virtualization, where it has a partnership with VMware (NYSE: VMW).
Unfortunately, both companies look very similar on the bottom line, with a mutually poor record of reporting any sort of profits. China VoIP has also seen its debt climb significantly in recent years. I think we can safely pass on this one.
The best
Nufarm
Look no further than Monsanto (NYSE: MON) and PotashCorp (NYSE: POT) to see how successful a company serving the agricultural sector can be. But should Australia's Nufarm be lumped with those particularly successful companies?
I'm not quite convinced that Nufarm is the next Monsanto. However, I think it's a company -- and a stock -- that investors may want to keep an eye on. Historically, Nufarm has produced solid returns on equity while managing to post reasonable growth. Recently, though, company missteps and economic conditions have hurt the bottom line and made the company's debt situation look worrisome. Meanwhile, an abandoned takeover attempt by China's Sinochem created an extra distraction.
The tough times may have created an opportunity for investors, though. Management is confident that profit margins will rebound in 2010, and that the company won't run afoul of its debt covenants. Meanwhile, Sumitomo Chemical recently paid AU$14 per share for 20% of Nufarm -- a 60% premium to where shares are trading today. The company's current trading multiples also suggest that the stock could be undervalued today.
U.S. investors will have to venture to the pink sheets to find Nufarm, but that trip may be worth it.
Caterpillar
Most U.S. investors don't need much of an introduction to heavy-machinery giant Caterpillar. Cat faces tough competition from the likes of Deere (NYSE: DE) and others, but its brand and huge global presence give it an edge over most of the companies that try to stack up.
The biggest question for investors, though, may be whether the company's stock is attractive at today's prices. After rebounding in a big way from last year's lows, I'm not convinced that today's price is all that much of a bargain.
However, I do think Cat is the kind of company worth keeping on a watch list, in case the stock does fall to a more attractive price.
We've now knocked another four off the list, but we still have 12,623 companies left to go. Be sure to stay tuned for the next installment!
Don't think you've found your next big winner here? Fool Austin Edwards thinks he may have found it for you.
