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 5,300 starred 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:
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Chevron
(NYSE:CVX) -
Eagle Bulk Shipping
(NASDAQ:EGLE) -
InterDigital
(NASDAQ:IDCC) -
Isis Pharmaceuticals
(NASDAQ:ISIS) -
Melco Crown Entertainment
(NASDAQ:MPEL)
Some of these names might surprise you. Oil giant Chevron, for example, is one of the largest integrated oil companies in the world, serving more than 100 countries. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, the 140,000-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?
Look for Lady Luck to start favoring casino stocks again. They've already jumped more than 90% on average so far this year. Melco Crown has done quite well, up more 100% since the start of the year, while Las Vegas Sands
Indeed, despite soft casino earnings both here and abroad, an improving landscape in Macau has tilted the odds in favor of operators there. The 32 casinos managed by the island's six licensed operators generated a record $1.4 billion in gross revenue in August. In contrast, Las Vegas properties have been averaging about a third of that each month.
That's good news for Las Vegas Sands, which is poised to unleash an IPO on the Hong Kong market, following the lead of Wynn Resorts
Like the swallows returning to Capistrano, gamblers are returning to Macau as the Chinese government eases the draconian visa restrictions it imposed last year. That development couldn't have happened soon enough for Melco Crown Entertainment, which posted a $144 million loss last quarter, compared with a $5.7 million loss a year ago. The gaming house is counting on its newest crown jewel, the City of Dreams resort, to pick up much of the slack. Although it only opened in June, the resort has already helped Melco capture 17% of the Macau market, up from 10% in the first half of the year.
Since Melco's shares have "only" doubled since the beginning of the year, CAPS member 20PercentPM thinks the casino operator still has more room to move:
This company is completely focused on that market which is now the biggest gambling market in the world, bigger than Las Vegas. This stock hasn't made the huge 1000% price gains like others such as Las Vegas Sands, so I think it has a good chance of sizable gains in the future. Price to book is also about 1/3 of what you would have to pay if you invested in the Sands. Don't get me wrong, I own stock in both, but I think it's time for this stock to play catch up.
Time to bulk up
CAPS All-Star member Teacherman1 thinks it's time to bulk up on shippers like Eagle Bulk Shippers, even though things look pretty dismal in the industry right now:
I know, some of them have a lot of debt, and the [Baltic Dry Index] is not particularly favorable. They are not paying a dividend at this time, so there is no reward for holding, but I am a longer term investor (2-3 years) and since I can not pick the exact top or bottom, I am willing to watch the (sometimes wild) gyrations and fluctuations for the intermediate term to achieve what I believe will be a very good longer term return.
That would be a typical value investor ploy, buying into an industry or stock when things seem bleakest. And indeed they do. As indicated by the Baltic Dry Index, dry bulk rates had enjoyed a recovery earlier this year as a result of congested ports. But analysts now see those artificially inflated rates collapsing. Eagle's shares have risen almost 12% over the past three months (they were even higher earlier this year). If the analysts are correct, this ship may already have sailed.
However, if Teacherman1 and mcouture1031 are correct, and the industry will recover as the economy continues to improve, you just might want to get your boarding pass here.
A great opportunity for you
Investor sentiment suggests these four-star investments still seem to be on their way to five-star greatness. Still, 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.
