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Dream Stocks for Contrarian Investors

By Dave Mock - Updated Apr 5, 2017 at 8:05PM

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Make finding beaten down, winning stocks a reality.

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy see what the 10 best stocks of the past decade were. But I'm more interested in the tools that can not only help me find new stock ideas, but also have the resources necessary to evaluate tomorrow's greatest companies.

There is a tool that offers a variety of resources to help with finding tomorrow's leaders: Motley Fool CAPS, a 120,000-member community of investors helping each other beat the market.

We've enlisted CAPS to screen for potential gems in companies that have fallen hard. CAPS' nifty screener will help us get the story behind highly rated stocks with:

  • A market cap of at least $500 million.
  • A long term debt-to-equity ratio of less than 0.5.
  • A share price at least 50% below its 12-month high.
  • An earnings-per-share growth rate of at least 20% over the past three years.
  • A price-to-earnings ratio of less than 25.

Opinions with the numbers
Here's a sampling from the list of stocks our screen pulled up today.

Company

% Below 12-Month High

CAPS Rating (Out of 5)

Atheros Communications (NASDAQ:ATHR)

58%

*****

Noble (NYSE:NE)

61.2%

*****

Suncor Energy (NYSE:SU)

71.1%

****

Agrium (NYSE:AGU)

72.4%

*****

PotashCorp (NYSE:POT)

74.5%

****

Data and star rankings from CAPS. All data as of Nov. 28.

Agrium
Agrium and several other fertilizer companies have seen their stocks suffer recently under the weight of accusations of price fixing and collusion. Beyond the legal threat, though, Agrium is flourishing as increased demand for food in emerging markets has continued, forcing farmers to invest in fertilizer to boost crop yields. In the third quarter, Agrium posted more than a 200% increase in sales at $3.1 billion and more than a sevenfold rise in earnings.

With the company anticipating another record quarter, more than 97% of the 1,560 CAPS members rating Agrium expect it to outperform the market.

Suncor Energy
Despite a recent drop in crude oil prices, many investors see a good long-term outlook for Suncor Energy. It reported a 40% jump in cash flow from operations in the third quarter as price realizations on its oilsands operations came in strong. Similar to Chesapeake Energy (NYSE:CHK) and Petrohawk Energy (NYSE:HK), Suncor said it will slow down spending.

Even though the world has seen a drop in demand for energy recently, developing countries are expected to continue to expand their use. As a result, many investors are thinking that this is the best opportunity in years to get cheap, cash-flowing stocks like Suncor. In CAPS, 96% of the 1,411 members rating Suncor Energy are bullish.

Noble
Even though shares have seen more than a 60% decline in the past six months, many investors like drilling-service company Noble for its reliable revenue and strong balance sheet. It commands strong dayrates for its rigs and is continually adding more deepwater rigs, which operate on longer-term contracts.

Noble's third-quarter earnings rose 20% as contract drilling revenue climbed by 16%. The company also has a positive outlook into next year because of a huge contract backlog, which Fitch Ratings recently estimated to be about $12.1 billion. More than 98% of the 1,729 CAPS members rating Noble have confidence that it will beat the S&P.

Atheros
Despite a slowing economy, semiconductor maker Atheros reported third-quarter sales growth of nearly 30% to a record $138.1 million, driven by strength in its personal computer, networking, and consumer business lines. Many believe it's a good time to be a buyer in tech companies, particularly those tapping solid trends in wireless communications, including notebook computers and smartphones. More than 98% of the 1,431 CAPS members rating Atheros agree and expect it to outperform the market.

PotashCorp
Like Agrium, many investors remain similarly bullish on PotashCorp and think agriculture will outlive the down cycle because of the growing worldwide food demand. PotashCorp controls a large portion of the world's potash supply, and many CAPS members believe that the company will command favorable prices for its products in the future. Overall, 95% of the 4,141 CAPS members rating PotashCorp expect it to outperform the market.

Let 120,000 investors be the judge
The collective wisdom of a huge pool of investors can help give context to a page of numbers developed through a stock screen. But even with an entire community of qualified opinions acting as the judge, individual investors are still the jury and should perform their own due diligence.

Run your favorite factors through the Motley Fool CAPS screener. It's totally free, and we think you'll like the results.

The Motley Fool Hidden Gems service looks for companies such as Atheros Communications with exceptional management and growth prospects. Check out what other gems lead analysts Tom Gardner and Bill Mann are recommending today with a free 30-day trial to the service.

Fool contributor Dave Mock dreams of stocks and sugarplum fairies, but not together. He owns no shares of companies mentioned here. Atheros Communications is a Hidden Gems recommendation. Chesapeake Energy is an Inside Value selection. The Fool's disclosure policy screens the good, the bad, and the ugly.

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Stocks Mentioned

Nutrien Stock Quote
Nutrien
POT
Noble Corporation plc Stock Quote
Noble Corporation plc
NEBLQ
Suncor Energy Inc. Stock Quote
Suncor Energy Inc.
SU
$30.39 (0.36%) $0.11
Qualcomm Atheros, Inc. Stock Quote
Qualcomm Atheros, Inc.
ATHR.DL
Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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