For every stock out there screaming "buy me," others simply give us a nudge and a nod. While all the attention might be focused on their five-star peers, we can sift through Motley Fool CAPS to find four-star stocks giving us the "high sign" they're approaching greatness.
These opportunities -- including familiar names and beaten-down companies -- rank higher than most of the other 5,400 starred companies, and it pays to investigate their potential. For consideration today I've got these three stocks on their way to fame.
Dr Pepper Snapple Group
As the 170,000-plus CAPS members have chosen these companies as less obvious sources for tomorrow's great buys, let's see why they might merit your attention.
In the sight of greatness?
With the marketing muscle that Coca-Cola
Despite the sharp elbows at the top of the list, Dr Pepper Snapple Group was able to edge its way into the fifth spot with its regular Dr Pepper drink, while Diet Dr. Pepper was ninth. Equally impressive was the company's 16.7% market share, putting it third behind Pepsi's 29.3% share and well ahead of the next-closest rival, Cott, which had just a 4.8% share. Coke led the industry with a 42% share of the market. But where Diet Coke actually posted a volume decline of 1%, Diet Dr Pepper (and Diet Mountain Dew, a Pepsi product) saw volumes rise in excess of 5%.
With 94% of the CAPS members rating Dr Pepper Snapple marking it to outperform the broad market averages -- and all seven Wall Street analysts following the beverage company agreeing -- its position seems pretty well ensured.
Gross margins have remained fairly stable for cereal maker Kellogg even as the price of commodities like corn, wheat, and sugar have exploded globally. Its roster of premium brands includes Special K, Famous Amos cookies, and Eggo waffles. Like General Mills
It's not going to get any easier, either. According to the market researchers at Rabobank, private label brands -- now there's an oxymoron -- are likely to see their global market share double to account for half of the market over the next 15 years. Having purchased private label goods during the recession, and apparently seeing no discernable difference for the most part in quality, 93% of consumers who bought store brands say they'll keep right on buying them even after the economy recovers.
But Rabobank says name brand manufacturers like Kellogg can still benefit, because they act as standards for price and quality for each type of product.
Wall Street has a nearly unanimous opinion about Kellogg, and CAPS member jdavis4982 said last month that getting paid to buy this stock at its reduced priced is a bargain you can't pass up:
The company is set up to outperform in 2011, and its cheap valuation (14.5x earnings) and attractive dividend (3.2% yield) add to the bullish case. I see shares reaching $57.
Add Kellogg to the Fool's free portfolio tracker and keep an eye on all the drama that develops between branded and private label goods.
Zip, zilch, zero
By relying on a network of third-party partners, email encryption specialist Zix was able to lean on its friends for support in the latest quarter. Revenue from continuing operations jumped 25% with resellers now accounting for more than half of its new business.
A spate of consolidation swept the space late last year with Cisco, Intel, and EMC
With shares selling 28% below their recent highs, Zix now trades for less than six times trailing earnings. With earnings expected to soar this year, its price is just a miniscule percentage of its growth prospects.
CAPS All-Star pennystockguy suggests that those looking at Zix ignore the long list of low-rated members who have marked the company to underperform, suspecting it's a coordinated effort to drive down the rating. While there are a remarkable number of members who've rated Zix and only Zix, they've wasted their effort if true: CAPS weighs the opinion of All-Stars far more heavily, and of the 109 who have given their opinion, all but one believe it will outperform the broad market indexes.
If you want to keep abreast of Zix's progress, you can monitor it by adding it to your watchlist.
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.
Sign up today for the completely free service and let us hear what you have to say about the great and almost-great companies that interest you.
Intel and Coca-Cola are Motley Fool Inside Value picks. Kellogg, Coca-Cola, and PepsiCo are Motley Fool Income Investor picks. The Fool has created a bull call spread position on Cisco. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel and on PepsiCo. The Fool owns shares of Coca-Cola, EMC, and PepsiCo. Motley Fool Alpha owns shares of Cisco. 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.