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
Data shows that stocks achieving five-star ratings on Motley Fool CAPS have outperformed the market by 12 percentage points, and newly minted five-star stocks represent your best opportunity to get those returns. So let's sift through the proprietary ratings system and find those stocks heading toward stardom. Here are a handful of four-star companies we found.
Some of these names might surprise you. Some view GPS maker Garmin as having lost its advantage, with its stand-alone devices soon becoming a thing of the past. Others say it's evolving. Almost great? Even familiar names can still offer some of the best opportunities. Perhaps we've just forgotten the potential they still hold. However, some of the 125,000-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
It might become more commonplace to see pharmaceuticals like Pfizer using the power of a merger to shore up a lagging pipeline. Its $68 billion blockbuster bid for Wyeth
Because I don't have a firm opinion on the fate of health care, I'm actually mostly neutral on Pfizer -- but I'm very confident that the Wyeth acquisition will lead it to dramatically underperform the healthcare sector, and likely the S&P. The Wyeth acquisition will kill this company's future growth prospects. First off, Pfizer is overpaying. Wyeth has significant unresolved product liability concerns, and Effexor XR, their largest selling product, is a short hop-skip and a jump away from generic competition.
A large question hanging over the medical device industry is whether the recession will take a toll on the capital budgets of hospitals, hurting companies like Intuitive Surgical. Its minimally invasive da Vinci System wins top honors for assisting doctors in the operating room, but fear of spending cutbacks affecting sales has hurt its stock. Kinetic Concepts
While the short-term prospects of selling more systems isn't great because of hospital budget pressures, the long-term prospect for this company is great. With the coming generation of doctors growing up using video game controls and consoles, surgeons will be clamoring for less "hands-on" operations and more tech assisted options. This along with the increased precision of this system and growing number of procedures available for doctors to perform via da Vinci will create greater and greater market possibilities.
A great opportunity for you
These four-star investments might be on their way to five-star greatness, and 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.
Garmin is a Motley Fool Global Gains selection. Pfizer is an Income Investor pick and an Inside Value pick. Intuitive Surgical is a Rule Breakers selection. The Fool owns shares of Pfizer and Kinetic Concepts. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Rich Duprey owns shares of Kinetic Concepts but does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.