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 5,400 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:
China Natural Gas
China Sky One Medical
Some of these names might surprise you. For example, Alcoa is predicting that global aluminum consumption will grow this year, particularly because of China, despite persistent fears of a European sovereign debt crisis that could have pretty harsh spillover effects.
Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
And some are expecting the damage from an oil rig at a BP well in the Gulf of Mexico to be worse than ExxonMobil's Valdez spill in Alaska, marring the carefully cultivated image of an environmentally responsible oil company. But Exxon eventually recovered, and it's likely BP will, too. However, the 160,000-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?
China Natural Gas looks like it wants to become the Clean Energy Fuels of China. It just got approval to build a new compressed natural gas station and six new fueling stations, which will add to the 36 stations it already operates.
As far as the numbers go, I love the sub 10 P/E in a small company that is posed to expand. Like it or not, China wants natural gas to account for (10%) of its energy expenditures, leading to potentially a lot more demand. As oil rises back up in price, I expect natural gas demand to rise a ton. Plus, I like how any changes to valuing China's currency should mean a net appreciation in the value of this company.
On the shoulders of giants
China Sky One Medical isn't trying to emulate any Western company, but rather it wants to infiltrate Western markets with traditional Chinese medicine. Unlike American Oriental Bioengineering
With the recent controversy surrounding the accounting of patent technology, CAPS member Amoney214 is worried whether China Sky One can stand up to closer scrutiny. But that hasn't stopped the broader CAPS community from rallying behind it, as 96% of the members rating it believe it will outperform the broad market average.
Prescription for growth
Here in the U.S., pharmacy chain Walgreen is attracting the attention of investors like cougarboo33, who writes that it's a steady, growing presence in neighborhoods. Although its purchase of rival Duane Reade has analysts at Standard & Poor's nervous that it's going to get more aggressive with its financial policy, and not in a good way, CAPS All-Star 00100 sees the acquisition as eventually contributing to earnings.
Upthumb. Excellent cash flow. Good payout. Slowing sales growth. Low debt ratio. Recent acquisition caused market to view company as higher risk. Factored in. But earnings should accelerate into the next 2 years with acquisition's contribution. Will also largely benefit from health care initiative.
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.
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