Amass a Fortune With These Stocks
You don't need the investing acumen of Warren Buffett or the riches of a trust-fund baby to achieve financial success.
Small sums of money invested monthly in undervalued small-cap stocks offer hope for your greatest returns. They offer the best growth opportunities for growth because the big investors mostly ignore them.
I've screened for stocks with less than a $3 billion in market cap and that offered earnings surprises of 15% or more in the previous quarter, with long-term earnings growth forecasted to be at least 15%. I'll then filter my findings through the collective investing wisdom of the 180,000 members in our Motley Fool CAPS community.
Here are some of the stocks this simple screen found:
EPS Actual vs. Estimated
Average Analyst 5-Year EPS Estimate
CAPS Rating (out of 5)
|Coinstar (NAS: CSTR)||$1.4 billion||33%||19%||**|
|Glu Mobile (NAS: GLUU)||$197 million||83%||30%||**|
|Universal Display (NAS: PANL)||$2.3 billion||1300%||25%||***|
Sources: Yahoo.com and Motley Fool CAPS.
Of course, this is not a list of stocks to buy -- just a starting point for more research. We need to look more closely at these companies to see whether analysts' faith in them is well-founded.
A link to the future
Did they learn nothing from Netflix (NAS: NFLX) ? Coinstar's kiosk movie-rental division Redbox scored a big bounce following the PR debacle suffered by the movies-by-mail king, which imperiously raised prices and started charging fees for content that was previously free. You would have thought Coinstar would be smart enough to capitalize on that ugly chapter, but you'd be wrong.
Although it saw profits surge 90% in the third quarter as consumers flocked to its kiosks after fleeing Netflix, Coinstar followed up with a price increase of its own. That and below-expectations profit forecasts for the fourth quarter led the stock to sell off.
Of course, Coinstar's not completely to blame. You can thank Congress for that, since the misguided debit-card-fee reform they passed is causing pricing problems to pop up elsewhere. Previously free banking services, for example, now may carry a price tag. Companies are passing their new, higher costs along to consumers. That is the true cost of government regulation.
The $0.20 increase in DVD rentals seems hardly prohibitive to consumers continuing to rent from the kiosk, though, and CAPS member BlueEyesGuy33 thinks there was an overreaction.
CSTR smashed Q3 Earnings projections. Then stock price fell roughly 15% due to market's thinking people won't pay $0.20 more to rent a DVD. Although it is a 20% increase in price; the increase is relatively small in terms of cash outlay to the consumer. I believe the market got this one wrong. Redbox will not lose customers over 20 cents. Stock price will be up over the next 3 months or so.
I agree and marked Coinstar to outperform on CAPS, but let us know in the comments section below or on the Coinstar CAPS page what you think. Also add it to your watchlist to be notified of the latest developments.
The growing dominance of Google's Android OS in smartphones is also propelling smartphone -game maker Glu Mobile forward. Where the OS owns nearly half of the smartphone market -- Apple's (NAS: AAPL) iOS is a distant second at 27% -- Glu has seen its market segment shift from feature phones to smartphones, which now also accounts for 57% of its revenues, and Android sales doubled from 15% to 30% of the total.
Glu will be devoting fewer resources to the feature-phone segment while pouring more into mobile computing platforms like the iPad. It's also piling on the "freemium" model -- or the free-to-play, pay-to-play-more way of doing things. Freemium revenues grew to $8.1 million from a little more than half a million last year.
CAPS member FormFactor believes the game maker has been unfairly beaten down.
Over sold based on current market valuations vs long term outlook, short and long term buy at $3.66 as of 02Nov2011 closing price. 3 day trend upward as of close on 02Nov2011. This one is not done running. Small cap but a global player. One to watch.
Add Glu Mobile to your watchlist, and let us know in the comments section below whether you think the stock belongs in a balanced portfolio.
OLED screen technologist Universal Display has been on something of a roller-coaster ride lately, as potential deals get squashed and confirmed. If it's not analysts dismissing the likelihood of an imminent agreement with Apple, it's short-sellers critiquing a new agreement with Samsung. It took Universal's third-quarter earnings report to lay both negative threads to rest: Profits are being generated by its current business, with worldwide patents remaining intact, showing that although an Apple deal would be nice, it's not essential for growth.
The company will be reporting "earnings" soon but hasn't made a profit in its 15 year history. It looks like they recently bungled their deal with Samsung and will not be making royalties, and Apple didn't bite. They are starting to lose court cases on their patents. Meanwhile a bunch of company insiders recently exercised options and sold between the $50-60 range. If they don't expect the stock to break out of that range any time soon, why should we?
Add the panel maker to the Fool's free portfolio tracker, and tell us on the Universal Display CAPS page your thoughts about its supply agreements and the short sellers who short the stock.
Foolish final thoughts
Stock investing is not brain surgery. Finding good, undervalued companies is not as difficult as the professionals want you to think. You just have to commit to starting now, and do so regularly. Now's the time to begin!
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Google and Apple.Motley Fool newsletter serviceshave recommended buying shares of Universal Display, Apple, Netflix, and Google and creating a bull call spread position in Apple. 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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