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 minimal 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
Est. EPS Growth Next Year
|Harris & Harris Group (NAS: TINY)||*****||1||NA|
|Jinpan International (NYS: JST)||****||1||6%|
|YM Biosciences (ASE: YMI)||****||3||(10%)|
Source: Yahoo! Finance; Motley Fool CAPS. NA = not available.
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
Nanotech venture capital firm Harris & Harris has cause to be cautiously optimistic these days. Since its first investment back in 1983, Harris has made a total of 93 of which they've exited 64 of them. In that time, they've also realized proceeds of more than $155 million on its invested capital of less than $90 million. While those returns include the sale of BioVex Group to Amgen earlier this year and Innovalight to DuPont (NYS: DD) this fall, it doesn't include the IPOs of both Solazyme (NAS: SZYM) and NeoPhotonics since they still have ownership stakes in them.
An exciting investment like this has CAPS member radiomanabq seeing the stock as undervalued:
This stock is currently way undervalued. The company continues to invest in many very exciting new technologies. Several home runs are just a few years away.
It reported results earlier this month that show it trading at less than its net asset value. Part of that reason could be because 70% of its investments are in privately held companies, meaning there's no ready market for its investments should it want or need to sell.
Let us know in the comments section below or on the Harris & Harris CAPS page if you think this is still a big opportunity, and add it to your watchlist to be notified of the latest developments.
Pump up the volume
Polysilicon prices have plummeted, and there's no sign that they'll be on the rise anytime soon as producers of the key ingredient for solar power continue to pump out greater volumes. LDK Solar (NYS: LDK) , the world's second largest manufacturer of wafers, will be tripling its capacity when it brings a new polysilicon facility online by the end of 2013.
Demand for solar power has dropped like a rock and prices have plummeted as governments around the world cut subsidies to the industry. LDK is now forecasting negative profit margins when only last quarter it was saying it would have profits between 11% and 16%.
Yet all this polysi production will likely help cast-resin transformer maker Jinpan International, which found that some of its best business last quarter came from polysi makers building new plants. After the current quarter's results came in strong, too, it said it now expects to see sales grow 48% to 50% and profits to climb 75% to 80%.
Almost 98% of those rating Jinpan agree it will outperform the market indexes. Add Jinpan International to your watchlist and let us know in the comments section below how long you think it can transform its business.
In the race to treat myelofibrosis, Incyte (NAS: INCY) was able to beat YM BioSciences to market with its Jakafi twice-daily therapy. And though first-to-market offers some benefits -- revenues and profits -- to the victor, YM's JAK1 and JAK2 Inhibitor CYT387 has been receiving positive results so far and as a once-daily treatment could readily replace Incyte as the preferred therapy.
While revenues were down slightly from the year-ago period, it significantly narrowed its losses from $0.14 a share to just a penny a share, though much of that was born on the back of financing income. The company changed how it reported its finances and gained on the revaluation of warrants.
Having finished enrolling patients in phase 2 trials for CYT387, it will be presenting updated data from this study next month. The CAPS community is expecting more positive results as just two of the dozens of All-Stars rating the biotech think it won't beat the broad indexes. Add YM to the Fool's free portfolio tracker and tell us on the YM BioSciences if you think it will still win the war despite losing this skirmish.
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. Click here to see his holdings and a short bio. The Motley Fool owns shares of Jinpan International and Solazyme. Motley Fool newsletter services have recommended buying shares of Jinpan International. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.