Find These Stocks Before Wall Street Does
Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. Getting in before Wall Street discovers them -- or rediscovers them -- means you can stake a claim before they start taking off.
Here we check out companies with minimal analyst coverage at best, and then we 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
Wall Street Bullish Sentiment
Estimated EPS Growth Next Year
|Chesapeake Granite Wash Trust (NAS: CHKR)||*****||0||NA||146%|
|SeaDrill (NAS: SDRL)||****||5||100%||9%|
Source: Motley Fool CAPS. NA = not available. Wall Street picks based on CAPS, Chesapeake Granite has three analysts following it according to Yahoo! Finance.
Remember, without much analyst support, you'll have to do more digging on your own to see whether these stocks deserve a spot in your portfolio, so don't just buy or sell them based solely on their appearance here.
Hiding in plain sight
The oil and gas industry has been rolling out royalty trusts at a quick pace these days that doesn't seem to be abating anytime soon. SandRidge Energy (NYS: SD) launched the SandRidge Permian Trust and SandRidge Mississippian Trust I recently, and it has a second Mississippian trust in the wings.
Chesapeake Energy (NYS: CHK) is also keeping up with the Joneses with its IPO of Chesapeake Granite Wash Trust, as has Whiting Petroleum, which unveiled Whiting USA Trust II just the other day (Whiting USA Trust I has been around for a few years).
So why this resurgence in trusts? It allows the parent company to generate gobs of cash for its assets without diluting current shareholders with new stock or burdening itself with debt. Given assets with significant reserves, the trusts should produce oil and gas faithfully over their 20-year lifespans.
Last year, Chesapeake Energy said it was doubling its rig count in Oklahoma and Kansas and was planning a nearly $2 billion capital expenditure plan for this year. But with $351 million in cash on its balance sheet against almost $10.6 billion in debt, it would be constrained. The trust gives it a chance to maximize value for shareholders without incurring their wrath.
So far there's unanimous opinion on the ability of the Granite Wash trust to outperform the market, but let us know your views of its prospects on the Chesapeake Energy Granite Wash Trust CAPS page, and add the trust to the Fool's free, personalized stock-tracking service to see how long it stays off the grid of the analyst community.
A rich patina
Ultra-deepwater drilling is the future of oil exploration, with investors able to choose between Transocean (NYS: RIG) , the industry's largest player by market cap, and lesser players like SeaDrill and Noble, among others.
SeaDrill is definitely an investor favorite, with all but one of 145 CAPS All-Stars rating the deepwater driller to outperform the broad indexes. Wall Street also likes its prospects, unanimously believing it will come out ahead, and while there's even a consensus of sorts among Foolish analysts, Sean Williams has problems with SeaDrill's inability to produce positive cash flows on anything approaching a regular basis.
Oil prices remain north of $100 a barrel, and SeaDrill recently secured a contract with dayrates of $595,000. Better yet, it says it expects rates to breach $600,000 soon and notes that some drillers are securing rates of $750,000 a day. It's a positive industry trend, and CAPS member troym72 thinks SeaDrill will climb.
There has been a recent pull-back in shares of SDRL. The company's earning and dividend yield support a much higher stock price than where it is now. I'm taking advantage of this pull-back to thumb up SDRL.
Let us know on the SeaDrill CAPS page whether you think it will continue sailing the high seas, and add it to your Watchlist to be alerted if it's at risk to sink to Davy Jones' locker.
Swing for the fences
If you're looking for other hidden energy opportunities, read The Motley Fool's special free report on "3 Stocks for $100 Oil." These three companies are poised to profit from the world's insatiable thirst for energy, but to find out which stocks our top analysts picked, download this report free for a limited time only.
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 Transocean.Motley Fool newsletter serviceshave recommended buying shares of Chesapeake Energy and SeaDrill. The Motley Fool has adisclosure policy. We Fools don't 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.