When asked for the secret of his success, baseball player Wee Willie Keeler replied, "Hit 'em where they ain't." What worked for Willie at the plate applies equally well in investing.
Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. When Wall Street turns a blind eye, you have a chance to get in before these stocks get discovered -- or rediscovered -- and start taking off.
Below, we'll check out companies with only a handful of analyst coverage, then pair our list with the opinions of the Motley Fool CAPS community. A stock that garners CAPS' top ratings, but hasn't yet caught analysts' attention, could be your next home run investment.
Wall St. Picks
5-Year EPS Growth
China Electric Motor
Integrated Silicon Solution
Source: Yahoo! Finance; Motley Fool CAPS.
Remember, without analyst support, you'll have to do your own scouting to see whether these stocks deserve a spot on your portfolio's roster. Don't just buy or sell them based solely on their appearance here.
Hiding in plain sight
When we first highlighted VoIP specialist 8x8 in September as a hidden stock with the potential to bring outsized returns, only 18 CAPS members had dialed into the company. There are now almost 100 members rating the company, 97% of whom believe it will go on to grind out market-beating performances. In less than two months, 8x8 has rocketed 74% higher compared to just a 4% rise in rival Vonage
Wall Street has yet to clue in to the growth story here. This past quarter, 8x8 reported revenues grew 8% and profits jumped 47%, while customer churn dropped to just 2.2%. Perhaps the results of the VoIP provider indicate there is a base forming in the economy since it focuses almost exclusively on small and medium businesses, as opposed to residential customers.
CAPS member kleyau thinks VoIP is going to be a much larger business than it is now:
Best performing stock I didn't recommend. I used to install VoIP systems, following it as a curiosity because the industry is going to be huge and I'd like to learn more about competitors to Cisco. Figured after a 50% rise since I started it, might as well recommend it and watch what happens. We'll see if I end up in the buy high and sell low trap.
You can add the IP communications service provider to your watchlist and have all the Foolish news and analysis about this stock aggregated in one place.
All charged up
While the economic distortions created by China's massive stimulus spending have some believing the program was a success, the bill for the asset bubbles created in housing, commodities, and elsewhere will eventually come due. As it comes apart, the dislocations are likely to be severe. You can't spend a trillion dollars year after year, primarily as credit, and not anticipate a hangover when the party ends.
That's part of the risk investors in China Electric Motor face since it counts on stimulus spending to fuel greater demand for its tiny motors, which appear in everything from household appliances to power tools. Similarly situated Harbin Electric
Although I've expressed concerns about China Electric Motor's opaqueness, more than 98% of the CAPS members rating the motor maker have indicated they think it will outperform the market. You can share your views on the China Electric Motor CAPS page.
A utility player
It wasn't that long ago Integrated Silicon Solution had pointed to its backlog as suggestive of the growth it anticipates, but sales came in well below "seasonal norms" and disappointed the market, sending its stock plunging. Now, like Atheros Communications
Swing for the fences
When seeking investments where no one else is looking, Motley Fool CAPS is the best place to start your own research. 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 tell us whether these hidden stock opportunities will help us go one up on Wall Street.
Atheros Communications and Logitech International are Motley Fool Hidden Gems choices. Motley Fool Options has recommended a write covered strangle position on Logitech International. The Fool owns shares of Atheros Communications and Logitech International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
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