You don't need the investing acumen of Warren Buffett or the riches of a trust fund baby to achieve financial success.
Since the stock market is your best hope for realizing your dreams, start investing today, by putting away small sums of money every month. Then seek out undervalued small-cap stocks for your greatest returns. I like these stocks because they offer opportunities for growth, while still being mostly overlooked by the big investors.
To find these future giants, we'll screen for stocks with market values less than $3 billion, an earnings surprise of 15% or more in the previous quarter, and forecasts for long-term earnings growth potential of at least 15%. We'll filter our findings through the collective investing wisdom of the 170,000 members in our Motley Fool CAPS community. If the best and brightest CAPS players think these stocks hold potential, we ought to take notice, too.
Here are some of the stocks this simple screen found:
|
Company |
Market Cap |
EPS Act. vs. Est. |
Avg. Analyst 5-Year EPS Est. |
CAPS Rating |
|---|---|---|---|---|
|
Quantum |
$840 million | $0.06 vs. $0.05 | 18% | *** |
|
SciClone Pharmaceuticals |
$209 million | $0.16 vs. $0.11 | 20% | **** |
|
Wonder Auto Technology |
$256 million | $0.35 vs. $0.23 | 20% | ***** |
Source: Yahoo.com and Motley Fool CAPS.
Of course, this is not a list of stocks to buy -- just a starting point for more research. We need to look more closely at these companies to see whether analysts' faith in them is well-founded. Still, since the CAPS community's helping us out, their favorite selections might be a good place to begin.
An alternative opportunity
If Quantum's survey on file restoration is accurate, it's easy to understand why EMC
According to the survey, U.S. businesses could save $6 billion annually by adopting deduplication, or the process of seeking out and destroying duplicate files on a company's computer system, thereby freeing up scarce storage space.
Storage was obviously one hot sector last year, with M&A activity soaring, but data deduplication was also growing in importance, though in a much less flashy way. Major players including Symantec, CommVault, and even Hewlett-Packard
That could make Quantum a sought-after company. I noted last year that if it was priced at the same valuation EMC put on Data Domain, it would go for around $19 a share. Shares have doubled over the past six months, but at only $4 a stub there's still a lot of upside potential to be found in its business.
Tell us on the Quantum CAPS page whether you believe this is a stock to store in your portfolio for the future.
Making a connection
It's been a long climb back up from the hole SciClone Pharmaceuticals fell into last August when the SEC announced it was investigating the company for allegedly violating antibribery laws. Merck was also a target. After plummeting 40% in one day, the stock has made up that lost ground and even trades near its 52-week high.
That's a result of the strong sales SciClone has enjoyed from its hepatitis B treatment, Zadaxin, which is approved for sale in China, with revenues up 32% last quarter. A hepatitis C treatment in midstage trials didn't fare as well and SciClone canceled the program, but the real investment story is its expansion plans in China. With a foothold already in the country, it's looking to acquire or in-license other products, which could be a powerful growth catalyst.
The CAPS community is behind that thought process, with 94% of the members rating the biotech believing it will continue pumping out market-beating results. You can keep an eye on its progress by adding SciClone to your watchlist.
Man the ramparts
Auto parts supplier Wonder Auto Technology ought to be doing well in the growing Chinese vehicle market, and while its profit reportedly doubled last quarter, questions remain about the efficacy of some of its acquisitions, the primary driver of its growth. Shares remain depressed, down 43% over the past year, but then again, shares of SORL Auto Parts and China Automotive Systems
CAPS All-Star kidderpeabodyny remains confident the auto supply market will remain a strong one for Wonder, and sees it as worthy of a long-term position in a portfolio:
alternators,starters,airbags,seatbelts, electric vehicle taxi parts/patents PLUS China to be a growing force in their share of the growing worldwide demand for autos.Great long term hold!
You can add Wonder Auto to the Fool's free portfolio tracker to keep an eye on what direction it's heading.
Foolish final thoughts
Stock investing is not brain surgery. Finding good, undervalued companies is not as difficult as the professionals want you to think. You just have to commit to starting now, and do so regularly. Now's the time to begin!
