Images
Source: U.S. Navy via Flickr.

If you look around among the dozens of big Wall Street research firms, you're liable to find one thing in common: most tend to recommend only large-cap stocks and/or household names. While there's nothing inherently wrong with this strategy -- let's face it, Apple shareholders haven't been complaining over the last decade -- focusing on 100 or 200 stocks when there are more than 7,000 stocks to choose from on major exchanges could be leaving a lot of gems uncovered.

Through this past weekend, names such as Anthera Pharmaceuticals and Exelixis in the biotech space and footwear manufacturer Skechers USA were among the best-performing stocks year-to-date, up 505%, 310%, and 179%, respectively. One thing they all share is their not being household name companies.

With that in mind, today we'll take a brief look at some of the best deals in under-the-radar stocks. As always, before we do you should keep two things in mind. First, these selections are arbitrary -- there are far more under-the-radar stocks that could be great deals than what I'm suggesting here. Second, stocks can move in both directions, and you should take these suggestions as merely starting points and not concrete signals to buy.

So, without further ado, the best deals in under-the-radar stocks.

Images
Source: Flickr user Roy Niswanger.

QLogic (NASDAQ:QLGC)
Nestled within the storage and server infrastructure providers industry is small-cap company QLogic. Over the past month shares of QLogic have taken an absolute beating, losing more than a third of their value.

The culprit? Weaker than expected revenue stemming from weakness in enterprise server and storage markets, and a buildup of inventory for one of its key OEM customers. On July 9, QLogic lowered its revenue forecast to approximately $113 million from a prior forecast of $124 million to $132 million. It also reduced its adjusted profit forecast to a range of $0.16-$0.17 from $0.23-$0.27. Then, when earnings day finally arrived, QLogic was whacked again by investors after it divulged plans to reduce operating expenses moving forward.  

While QLogic's results weren't pretty, the company remains decisively profitable, and it has demonstrated its ability to overcome a shifting demand environment in previous years. Remember, this is a cyclical business, but over the long run the demand for enterprise server and storage infrastructure is only going to increase. As long as QLogic can be prudent about its cash management throughout the good and bad times, it should have very little to worry about.

QLogic ended the quarter with $308.9 million in cash and marketable securities, which equals around $3.50 per share. This cash provides a nice backdrop in case QLogic's business weakens further, and it could be a dangling carrot that entices a larger player to take a look at QLogic, just as Avago did with QLogic's networking peer Emulex earlier this year when it purchased the company for a 26% premium to its prior-day closing price.

A forward P/E of less than 10 and a boatload of cash makes QLogic an under-the-radar stock worth watching in the tech sector.

Viekira Pak
Source: AbbVie.

Enanta Pharmaceuticals (NASDAQ:ENTA)
Enanta Pharmaceuticals is like the little brother that's always forced to live in the shadow of the big brother -- but it may actually be ready to step into the spotlight.

Enanta is a small-cap biopharmaceutical company that brought the world the protease inhibitor paritaprevir. Don't worry if the name doesn't ring a bell, because it's not sold as a stand-alone product. However, it is part of the regimen that makes up AbbVie's groundbreaking hepatitis C treatment known as Viekira Pak (or Viekirax in overseas markets). There are more than 3 million people in the U.S. with HCV (many undiagnosed) per the Centers for Disease Control and Prevention, and around 180 million people worldwide with the disease based on estimates from the World Health Organization. In other words, Viekira Pak could be working its magic alongside other HCV therapies for years, or decades, to come.

In AbbVie's latest quarterly results, it reported $385 million in Viekira Pak/Viekirax sales, up from $231 million in Q1 2015, its first full quarter on the market. Growth was substantial in both the U.S. and international markets, and the initial uptake suggests Viekira Pak has a good shot at blockbuster status within its first year and beyond.

In return, Enanta currently receives a 3% royalty interest as well as ongoing milestone payments. A $30 million payment upon reimbursement approval in Japan is also expected before year's end.

All told, Enanta has relatively low research and development costs (it still has a small handful of HCV and liver disease studies ongoing, mostly in the preclinical or early stages) that should allow its substantial royalty payments to translate into hefty profits. The company is only sporting a forward P/E of 13, and it's carrying around $212 million in cash, cash equivalents, and marketable securities, which comprises about a quarter of its current valuation.

Long story short, this looks to be among the best deals in the biotech sector for under-the-radar stocks.

G
Rayong refining plant construction. Source: Fluor.

Fluor (NYSE:FLR)
Lastly, I'd suggest you turn your attention to the construction and consulting industry, where Fluor is a giant that few investors would recognize.

Summarizing what Fluor does would require a small novel. To keep things short and sweet, it advises on, and provides for the construction of, major projects in the oil & gas, power, and industrial infrastructure sectors. As you may have correctly surmised from its business description, weaker commodity prices, from oil to metals like gold and silver, have reduced its near-term demand for consulting and construction services. Its clients have been reducing their capital spending, and in turn Fluor lowered its full-year forecast to a range of $4.05-$4.35 from a prior forecast of $4.40-$5 two weeks ago.

However, this weakness is more than likely temporary. Global energy demand, according to a report in 2013 from the U.S. Energy Information Administration, is expected to grow by 56% by 2040, led by emerging market giants like India and China. That alone should help buoy commodities such as oil over the long run. Also, as oil prices fall, the cost of contracting Fluor's services could fall in tandem, making it more economically feasible for oil and gas companies to once again lean on Fluor and grow their infrastructure.

Even with Fluor's recent earnings flub, it's still sporting a $41.6 billion backlog -- that's more than two full years' worth of revenue -- including $4.3 billion in new awards this past quarter, mostly from the oil and gas industry.

With a forward P/E of just 11, a healthy backlog, and a thesis that supports long-term strength in commodity prices, Fluor is an under-the-radar midcap stock you should be monitoring.

Sean Williams owns shares of Exelixis, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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