Stocks on the Road to Greatness

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" that 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 have a pair of stocks on their way to fame and glory.

Source: Motley Fool CAPS.

As the 180,000-member CAPS community has chosen these two companies as less obvious sources for tomorrow's great buys, let's see why they might merit your attention.

In the sight of greatness
After reading the headlines, you're probably feeling confused right now about how the auto industry is performing. Don't worry; it's not your fault. The media can't decide how best to describe what's going on. From MarketWatch we learn "Big Three Auto Sales Soar in May" while Reuters tells us "May sales disappoint; demand slows." And not to be outdone, Business Insider informs us that sales fell below 14 million units for the first time this year in May, but "Detroit and Japan surge." Seems we have it all covered.

While all three Detroit carmakers did indeed see sales grow, with Chrysler up 30%, Ford coming in 13% higher, and General Motors (NYSE: GM) following at 11%, consumers just weren't in as much of a car-buying mood as they were earlier in the year. While some lay the blame on the mild winter that pulled demand forward, it's likely the worsening economic picture also has people not wanting to commit to big purchases.

Overall, U.S. sales from all carmakers, including Japan's Toyota, Honda, and Nissan, which reported exceptionally strong gains -- but not surprising since their sales flatlined after last year's earthquake-tsunami -- were up 26%. But as Business Insider reports, that puts the seasonally annually adjusted rate at 13.7 million units, well below the 14.5 million analysts were anticipating, somewhat troubling since last month had two extra selling days compared with 2011.

Yet it's also clear that Ford remains a healthy carmaker steadily growing sales, particularly of its trucks, which saw sales jump 20% year over year. With its shares off by more than a third from recent highs and trading at just two times trailing earnings and less than six times estimates, CAPS member RumbachStock suggests this is an excellent time to buy the stock, if not one of its cars: "Solid brand name, great competitive [advantages], consistent earnings, low valuation."

Add Ford to your Watchlist, and tell me in the comments section below or on the Ford CAPS page whether you think it's about to drive off with new growth.

Take two and call me in the morning
The fallout from the battle between Walgreen and Express Scripts (Nasdaq: ESRX) has battered the drugstore chain far more than the drug-benefits manager, and though the two announced they had stopped suing each other, they're no closer to a deal now than they were in January, when Walgreen stopped filling the prescriptions of Express Scripts customers. The drugstore's stock has fallen sharply in recent weeks and is down by a third from the highs it hit last summer. Express Scripts, on the other hand, has eased back only 15% from the highs it was trading in April, bolstered as it's been by the acquisition of Medco.

Also benefiting has been CVS Caremark (NYSE: CVS), which finds its stock 15% higher over the past 12 months. While Walgreen was confident it could keep almost all of its customers, it lost millions of dollars in prescription sales this year and saw its second quarter profits drop nearly 8% because of the loss of Express Scripts.

Walgreen has a continuing contract with Medco that remains in effect, so a big risk for it is if the benefits manager consolidates its contracts and makes the drugstore chain choose all or nothing. There doesn't seem to be any reason it wouldn't do that, so I have a tough time seeing Walgreen coming out ahead here. That puts me amongst the minority of CAPS members who overwhelmingly see it outperforming the broad market indexes.

Some 94% of the 2,209 members rating the drugstore believe it will beat the Street, including assassin17, who sees it winning in the market even if it loses to Express Scripts: "3% dividend yield, great balance sheet, consistent operating margins over the past 5 years (2011 actually better than previous two years), consistently growing sales until recently, and stock is down 15% from recent highs."

Add Walgreen to the Fool's free stock-tracking service, and let us know on the Walgreen CAPS page or in the comments below whether you think it has the right prescription for success.

A great opportunity for you
Investor sentiment suggests these four-star investments are on their way to five-star greatness, but cars and drugs might be hurting, while the smartphone and tablet revolution is still gaining legs. You can read The Motley Fool's report on three hidden winners of the iPhone, iPad, and Android revolution to find out more. This report will be available only for a limited period. Get it before it's gone!