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 5,400 rated 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 that might be approaching greatness. Here are a handful:
Internap Network Services
Some of these names might surprise you. For example, SanDisk has been a leading NAND Flash memory card maker for years, able to beat analyst expectations by offering conservative guidance. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold.
Internap Network Services is another company that has had a laugh on Wall Street, but as it makes the transition into profitability, it still faces competition from larger rivals. Some of the 160,000-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?
As the tech sector continues its recovery, the importance of Cymer's technologies will become more apparent. The advanced photolithography specialist was tagged as a stock ready to move up earlier this year, and some investors have been warming to the company as the semiconductor capital equipment cycle strengthens.
With no long-term debt on its books, Cymer remains flexible enough to capitalize on increasing demand. It manufactures excimer light sources, which are able to remove very fine amounts of surface material without affecting layers beneath, a use especially suited to semiconductor manufacturing. Analysts are expecting an 88% increase in revenue when the company reports quarterly earnings later this month.
Cymer is trading at just 11 times next year's estimates, and I think the company has the potential to beat the market averages, so I've marked it to outperform on its CAPS page. Head over there and let us know what you think.
On the shoulders of giants
The recent decline in DragonWave's stock price has some investors speculating that the company may have lost its contracts with Clearwire
The CAPS members who have rated DragonWave overwhelmingly believe the stock will be able to outperform the broad market averages, and member zkbeta51 said earlier this year that while speculative, its unique 4G technology ought to find a place in the wireless network market. Member Xitopie would agree that as the technology is upgraded, DragonWave's position will be, too.
A big opportunity
Pharmaceutical newcomer Santarus has lost a little of the gains it made after reporting earnings for the latest quarter that nearly doubled analyst expectations. Sales of the company's acid reflux treatment Zegerid climbed 8%, and Santarus also received a milestone payment from Merck
Also, Santarus could gain an additional $37.5 million in sales milestone payments at any time as royalties on the sales of over-the-counter Zegerid. It's aiming at a $1.8 billion annual market here, but the overhang of a potential patent challenge does raise the risks. Still, 90% of CAPS members rating Santarus believe it will outperform the market.
A great opportunity for you
Some investors suggest these four-star investments still seem to be on their way up, but it pays to start your own research 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.