Wall Street's Best Hidden Stocks
When asked for the secret of his success, baseball player Wee Willie Keeler replied, "Hit 'em where they ain't." What worked for Willie at the plate applies equally well in investing.
Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. When Wall Street turns a blind eye, you have a chance to get in before these stocks get discovered -- or rediscovered -- and start taking off.
Below, we'll check out companies with only a handful of analyst coverage, then pair our list with the opinions of the Motley Fool CAPS community. A stock that garners CAPS' top ratings but hasn't yet caught analysts' attention could be your next home run investment.
CAPS Rating(out of 5)
Wall Street Picks
Estimated EPS Growth Next Year
|Exelixis (NAS: EXEL)||****||5||(2,967%)|
|Identive Group (NAS: INVE)||*****||0||375%|
|Primo Water (NAS: PRMW)||****||2||400%|
Sources: Yahoo! Finance, Motley Fool CAPS.
Remember, without much analyst support, you'll have to do your own scouting to see whether these stocks deserve a spot on your portfolio's roster. Don't just buy or sell them based solely on their appearance here.
Hiding in plain sight
Data delayed is data denied. Exelixis earlier this summer postponed the results of a trial testing cabozantinib in medullary thyroid cancer patients for three months, but earlier this month it extended the timeline again until some day in the fourth quarter. Although that decision might have some observers thinking that it may want to put off bad news as long as possible, it could be just as certain that the company wants to have all its ducks in a row for the positive data it's going to reveal.
Exelixis is also trying to move cabozantinib into the prostate-cancer market, which would give it more patients -- and more competitors -- than the medullary thyroid market, so there's a lot riding on successful outcomes here. A rumor of negative data sent the stock reeling momentarily last week, but it recovered when they proved unfounded.
For thyroid-cancer patients, Exelixis' treatment would compete against AstraZeneca's vandetanib, but in the prostate market, it would go up against the likes of Johnson & Johnson (NYS: JNJ) , Dendreon (NAS: DNDN) , and Sanofi. Yet the latter market has some analysts believing it could achieve $189 million in revenues by 2020, compared with $122 million for the former market.
CAPS member JuanPeter says the thyroid market is the one that matters: "Positive results from this trial are not granted at all. Although MTC is a small indication, it'd be a great opportunity to validate its technology and above all, it'd be a vote of confidence for Exelixis' only drug."
Let us know on the Exelixis CAPS page whether you think the biotech is nearing a big payoff.
Near and dear to your heart
Pairing up with NXP Semiconductors, near-field communications specialist Identive Group is ready to bring the burgeoning niche to the masses.
The two industry leaders are producing an NFC tag that will be able to be read through glass and display cases. That would make the technology more useful for consumers who want to access data that businesses, governments, and others choose to display by waving their cell phones in front of it. And because of its small form factor -- it consumes only 144 bytes of memory -- cell-phone makers can preload their phones with promotional URL addresses or other content.
Google (NAS: GOOG) , through its Wallet technology, is looking to leverage near-field communications with retailers sporting NFC tags, allowing consumers to wave their smartphones at readers to make purchases.
This could all help explain why there's unanimous opinion amongst CAPS members and All-Stars that Identive will outperform the market over the long haul. Add the security specialist to your watchlist and see whether it's near an inflection point.
Gunning for growth
I've rated Primo Water on CAPS to beat the broad indexes, but I'm not completely sold on its business model as a long-term success. There can hardly be anything more commoditized than water -- open up your tap -- but concerns about water quality is what keeps driving consumers to Poland Spring, Nestle's Deer Park, and others.
Primo Water wants to tap into that concern by making its multi-gallon jugs widely available, and it has distribution deals in place for its jug exchange stations with big-box retailers as well as your local grocery store. The primary difference between Primo and Poland Spring is that the former delivers your water to you, and the latter you have to exchange your jugs yourself, like refilling your gas grill's propane tank.
It now wants to get into the home-brew market championed by SodaStream (NAS: SODA) , offering a DIY soda station using home carbonation devices. And CAPS member ddbikessamsara, who sees its entry into the home as a big step forward, points to a combination water/soda/coffee machine targeted to the office market in the fourth quarter as yet another huge opportunity.
Add the water purveyor to the Fool's free portfolio tracker, and soak in its progress from here.
Swing for the fences
When seeking investments where no one else is looking, Motley Fool CAPS is the best place to start your own research. 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 tell us whether these hidden stock opportunities will help us go one up on Wall Street.
At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson, Dendreon, Exelixis, and Google. Motley Fool newsletter services have recommended buying shares of NXP Semiconductors, Exelixis, SodaStream International, Google, and Johnson & Johnson and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.