Stocks on the Road to Greatness

For every stock out there screaming, "buy me," others simply give us a nudge and a nod. While all the attention might be focused on their five-star peers, we can sift through Motley Fool CAPS to find 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 pair of stocks on their way to fame and glory.


Market Cap

1-Year Revenue Growth

1-Year EPS Growth

1-Year Stock Return

American Tower (NYS: AMT)

$25.1 billion




Brocade Communications (NAS: BRCD)

$2.5 billion




Source: Motley Fool CAPS.

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

In the sight of greatness
A dividend that yields just 1.3% doesn't seem all that exciting for a real estate investment trust. ARMOUR yields nearly 18%, while Annaly Capital pays out 14%, so American Tower's trifling amount will likely not have yield-seeking investors stampeding to its door. Their mistake.

American Tower just converted to REIT status starting Jan. 1, so as all REITs must do, it will pay out 90% of its earnings in dividends. But it would appear the real growth phase is still in front of it, as the growth of wireless communications will put its network of towers and antenna systems in high demand. Revenues and earnings have been scaling up in recent quarters, and its shares trade at all-time highs.

There is risk, however, because as the need for towers grows, so, too, does resistance to their siting. It's one of the reasons I think Alcatel-Lucent (NYS: ALU) will be a huge winner going forward, because it makes low-profile antennas that can mounted on poles or even unobtrusively on the side of a building. I think its small-cell wireless technology will be key in helping telecoms meet the burgeoning demands being placed on their networks.

Yet there will also remain a need for the towers erected by American Tower and SBC Communications, so I can see a number of winners emerging from the mobile-communications explosion to come as a result of 4G-LTE technology.

While I've put my money on Alcatel, the analyst community is unanimously behind American Tower's ascendancy, and even the broader CAPS community, where more than 900 members have weighed in, finds 90% of those rating the tower company to outperform the market indexes.

Add American Tower to your Watchlist, and tell me in the comments section below or on the American Tower CAPS page whether you think it will tower over the competition.

More than a threadbare opportunity
Using its contracts with Dell, IBM, and HP, Brocade Communications has encroached on territory traditionally dominated by Cisco (NAS: CSCO) . It hopes a new Ethernet fabric will create an intelligent base for cloud-optimized networking that will give it greater leverage. The rivals have been only too willing to help unseat the heretofore king.

The idea is gaining a lot of attention. Juniper Networks (NAS: JNPR) is developing its qFabric, Cisco has been out there pushing its FabricPath, and Brocade is getting good reviews for its virtual cluster switching. As virtualization grows, and grows in complexity, analysts at places like Gartner see "computing fabric" as the next stage in overcoming network problems caused by virtualization. Brocade has made a big bet on this business, but last quarter the Ethernet segment saw sales rise just 1%. With rumors still floating around that it may be acquired, if Brocade can make its market with the fabric technology, it might find someone willing to finally step up to the altar.

While CAPS member Lordrobot doesn't see the prospects for a proposal improving anytime soon, that's fine with most other CAPS members, as 94% of those rating the tech specialist see it beating the Street all on its own.

Add the Brocade to the Fool's free portfolio tracker, and let us know on the Brocade Communications CAPS page or in the comments below whether you think it will weave a pattern of growth that would prove attractive to a suitor.

A great opportunity for you
Investor sentiment suggests that these four-star investments are on their way to five-star greatness, but check out some other companies benefiting from the smartphone and tablet revolution. You can read The Motley Fool's report on three hidden winners of the iPhone, iPad, and Android revolution to find out more. This report will be available only for a limited period. Get it before it's gone!

At the time thisarticle was published Fool contributorRich Dupreyowns shares of Alcatel-Lucent and Cisco Systems, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Annaly Capital Management, Cisco Systems, and IBM.Motley Fool newsletter serviceshave recommended buying shares of American Tower and Annaly Capital Management and writing covered calls on Dell. 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.

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