As the stock market has continued its astonishing run over the past six months, our Rising Stars have been publicly making their picks every step of the way.
Many of them are beating the market, and several others would be if they weren't sitting on so much cash. In fact, three of our analysts are outperforming the market and creating substantial returns for anyone following them -- Jason Moser, Alyce Lomax, and Eric Bleeker.
If you want to know where our best and brightest are putting their money now, I suggest you read below, as I'll be detailing four of their recent picks. At the end, I'll also offer you access to a special free report on underappreciated stocks that only the smartest investors are buying now.
Zipcar (NAS: ZIP)
This company is no stranger to our Rising Star cohort, as it's an active pick of several different Fools. But Rex Moore came to his decision to buy the company through a very unique process: He was looking for companies with negative free cash flow.
Yes, you read that right: negative free cash flow. "I'm specifically looking for companies investing heavily into their high-return business, and Zipcar fits the bill. What's more, its cash from operations is now positive and growing quickly, providing further evidence of the strength of the business," Rex explains.
Rex sees Zipcar's status as top dog and first mover in the car-sharing industry as providing a significant moat as competitors start jumping into the fray. With an appealing model and price tag that's about half what it was around its IPO, Rex is excited about this buy.
Halliburton (NYS: HAL)
Though Jason Moser admits that this energy play may not be everyone's favorite company to root for, Halliburton has some serious headwinds and a cheaply priced stock to offer the interested investor.
Management sees three big drivers for growth.
1. Unconventional markets: As the world's leading provider of fracking materials, Halliburton stands to benefit from increased interest in the natural-gas-extraction technology.
2. Deepwater: Deep-drilling industry leader Seadrill (NYS: SDRL) is seeing ramped-up demand for their services for the first time since the Gulf oil spill. "That means more work for Halliburton," Jason explains.
3. Mature fields: Even when the oil has stopped gushing profusely from older oil rigs, they still need to be maintained. Halliburton offers the services drillers need to stay on top of their upkeep.
When you combine these three with a price that Jason thinks is downright cheap, you can see why he's eager to jump in.
Anand acknowledges that there are several risks associated with buying shares in the company -- the least of which is its exposure to volatile European and emerging market countries. On top of that, the government owns a quarter of the company (which means it might not be too friendly to minority shareholders), and its balance sheet is far from stellar.
But Anand thinks that at today's prices, there's more upside than downside. For starters, the company has a proven track record of producing profits over the past five years -- which have been trying years for all European telecoms. Furthermore, the company is taking steps to shore up its balance sheet -- by cancelling share buybacks, slowing the pace of acquisitions, and lowering its dividend.
Not a fan of lowering dividends? Fear not, Anand says: France Telecom's is still a juicy 10% at today's prices.
Tennant (NYS: TNC)
Rising Star Alyce Lomax decided Tennant had all of the necessary characteristics for her socially responsible portfolio. For starters, the company's Orbio industrial cleaning line is a leading innovator in sustainable technology -- using 70% less water than traditional cleaning machines. Tennant also provides Green Machines, which focus on using as little energy as possible, to clean up public areas.
As far as the stock's price goes, Alyce sees lots to like. The company has a strong balance sheet and a modest dividend. "However, Tennant's most compelling multiple is its PEG ratio of 1.00, which indicates an undervalued stock relative to growth expectations," Alyce says.
Further food for thought
Clearly, we think our Rising Stars represent the cream of the crop -- that's why we let them invest the Fool's money on our behalf. If you'd like to know where they think the smartest investors are putting their money today, you should check out our special free report: "The Stocks Only the Smartest Investors Are Buying."
Inside, you'll get the name of the bank Warren Buffett would probably be interested in if he could still invest in small banks. Get your copy of the report today, absolutely free.
At the time thisarticle was published Fool contributorBrian Stoffelowns shares of Zipcar. You can follow him on Twitter, where he goes byTMFStoffel.The Motley Fool owns shares of Tennant and Zipcar.Motley Fool newsletter serviceshave recommended buying shares of Zipcar, France Telecom, Tennant, and SeaDrill. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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