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:
Lloyds Banking Group
Medco Health Solutions
Smith & Wesson Holding Group
Some of these names might surprise you. For example, Verizon is a leading wireless telecommunications provider. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
And despite slurping the same toxic soup that sickened peers, Lloyds Banking Group, now partially nationalized, surprised investors when management predicted it will return to profitability this year after seeing improvement in its core business. 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?
According to President Obama, his health-care overhaul is already "delivering real benefits" because insurance companies are stopping the process of dropping patients who get sick. Without naming WellPoint
This might be a diversion from a program that might inflict damage come election time, but Obamacare has benefits providers like Healthways unsure of how their business will grow. Although it reported a profit for its latest quarter, the company's range for full-year revenue is still mostly below 2009's levels, possibly as management remains cautious about the law's impact.
Management might be considering that Verizon, AT&T
While the reduced outlook causes CAPS member brocksamson to predict a bleak future for Healthways, that is a minority viewpoint. More than 94% of CAPS members rating the company believe it will go on to outperform the market, and all but one of the 10 Wall Street analysts following the company agree.
On the shoulders of giants
Questions about Obamacare don't necessarily carry over to pharmacy benefits managers (PBMs) like Medco Health Solutions and Express Scripts, so CAPS member AQ1USN expects Medco will be able to take advantage of reform.
That could come about if some companies use a provision in the law that would effectively make retirees Medicare beneficiaries. Although Medco believes most companies will stick with their current setup, Express Scripts says this portion of its business will easily double this year. Either way, the PBMs will be able to oversee the benefits.
A big opportunity
Firearms sales skyrocketed last year partly because some people were afraid gun rights would be restricted and partly because of the recession, but Smith & Wesson's latest earnings report showed a drop in background checks on gun buyers that may indicate a change in sentiment and an improving economy.
Smith & Wesson makes [comparable] quality firearms yet the shares sell for less than a third of the price/value of [Smith & Wesson]. Five-year price objective of Smith & Wesson Holding Corporation is in the $-$18 per share range.
A great opportunity for you
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