3 Stocks Approaching Greatness

For every stock out there screaming, "buy me," others simply give us a nudge and a nod. While the five-star stocks get all the attention, we can sift through Motley Fool CAPS to find the four-star stocks giving us the "high sign" that they're approaching greatness.

These opportunities -- including familiar names and beaten-down companies -- rank higher than most of the other 5,400 starred companies, and it pays to investigate their potential. For consideration today, I have this handful of stocks on their way to fame.

  • Annaly Capital Management (NYS: NLY)

  • Zix (NAS: ZIXI)

  • TIBCO Software (NAS: TIBX)

As the 180,000-plus CAPS members have chosen these companies as less obvious sources for tomorrow's great buys, let's see why they might merit your attention.

In the sight of greatness
Profiting from the spread between low-interest short-term borrowing and purchasing high-interest long-term securities, mortgage REITs such as Annaly Capital Management, Newcastle Investment (NYS: NCT) , and Hatteras Financial (NYS: HTS) can thrive in low-rate environments such as exist now. According to Bankrate.com, mortgage rates have never been lower than they are now.

Annaly capitalizes further by transferring the risks associated with the mortgage-back securities it invests in from itself to the taxpayer. By buying MBSes that are backed by the full faith and credit of the government through Fannie Mae and Freddie Mac, it is those agencies that will suffer the loss in the event of a collapse, and not Annaly itself.

And a collapse is eminently possible. Fannie and Freddie guarantee 70% of the mortgages made in the country, meaning if the situation continues to worsen, the taxpayers could be on the hook for trillions of dollars in mortgage defaults. Annaly, though, needn't worry, though what the future of it as an investment at that point would be is anyone's guess. In the meantime, it is enjoying the exploitation of a market created by the Fed's monetary policy.

CAPS member billde2000 is willing to bet on Annaly for a few years yet, though a regime change could mean stark changes in the market.

Fed and market dynamics will keep a low lock on mtg rates owing to the multi trillion still outstanding. When election time is here and the Fed has a new chairman all bets are off. That is why I only chose to project out 1 to 2 years. Too far out is too unclear!

Share your thoughts on the Annaly Capital Management CAPS page if you think it isn't mortgaging its future, and then put it on your Watchlist to keep track of its progress.

Social insecurity
Fear is a wonderful motivator. The potential for loss of identity, financial information, or simply data is driving the growth of security measures to prevent leaks from occurring. Sometimes, though, as in the case of VASCO Data Security (NAS: VDSI) , it's the guardians at the gate that are facilitating the break-in. Its DigiNotar subsidiary ruined its reputation and business by providing the Iranian government a security certificate that allowed it to spy on its citizens.

Yet according to a study conducted by Stanford University, it doesn't even have to be something so nefarious as repressing a population. Simply clicking on an ad on the Home Depot (NYS: HD) website sent personally identifiable data to 13 data-collection companies, even though its website says it doesn't share such data with outside businesses. And don't click on anything on the weather site Weather Underground, as 22 companies get your information there.

But email breaches are the worst offenders, according to email-encryption specialist Zix, which found that the majority of security breaches are caused by improper email practices by employees. More than half of the 830 information-technology, security, and compliance professionals it surveyed said email was the chink in the armor.

CAPS member hurricanehedge believes such dangers will help push Zix higher in the future, or at least make it attractive to someone else: "With constant growth in revenue and EPS and such a low P.E. Ratio, i see this stock becoming a big company in the next 2-4 years. [H]opefully, since i am invested in them, they either buy someone up or someone buys them up."

Tess us in the comments section below or on the Zix CAPS page whether this is still a secure investment, and add it to your watchlist to see whether its stock hits further record levels.

A razor's edge
TIBCO Software sells enterprise-level software that allows applications to connect to one another. Second-quarter results disappointed as it came up against tougher comparables, but the third quarter received a boost from higher government spending, allowing it to raise fourth-quarter expectations.

Predicting trends and spotting problems has created a need for solutions that quickly identify them and respond with solutions. Government and financial institutions, in particular, are looking to TIBCO and its "two-second advantage" -- capturing the right information at the right time and acting on it preemptively -- to meet the demand. It might be even stealing share from rival Progress Software, which lowered its third-quarter guidance because of customers who delayed making purchasing decisions.

Highly rated CAPS All-Star member ll0o0ll believes it's just a matter of time before TIBCO is acquired: "Demand for middleware products will be strong as you need to connect software run on public and private clouds. Tibco is one of leading companies and is likely to be snapped by Oracle."

Preempt the critics by giving us your views on the TIBCO Software CAPS page, and then add the stock to the Fool's free portfolio tracker to see whether it captures a larger piece of the market.

A great opportunity for you
Investor sentiment suggests that these four-star investments still seem to be on their way to five-star greatness, but 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.

At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Annaly Capital Management.Motley Fool newsletter serviceshave recommended buying shares of Home Depot and TIBCO Software. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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