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, 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)

Arcos Dorados (NAS: ARCO)





Heckmann (NYS: HEK)





Source: Motley Fool CAPS.

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 buy or sell them based solely on their appearance here.

Hiding in plain sight
Despite the amazing growth prospects standing before McDonald's (NYS: MCD) franchisee Arcos Dorados in Brazil and throughout Latin America and the Caribbean, investors need to keep a watch out for the crazy aunt in the attic, Argentina's new economic overlord, President Cristina Kirchner.

Following in the footsteps of her mentor, Venezuelan strongman Hugo Chavez, Kirchner has deployed significant intervention in the economy and most recently nationalized Spanish oil giant YPF over accusations of not spending enough money in the country. Because Arcos Dorados is headquartered in Buenos Aires, it needs to keep one eye on its business and both eyes on the government. Policy decisions can wreak havoc with a restaurateur's operations.

Venezuela's currency controls in 2010, for example, were largely responsible for the 35% decline Arcos experienced in adjusted EBITDA. Kirchner has only just gotten going with her own interventionist policies and Bolivia is quickly following, seizing control of another Spanish energy operator, power grid operator Red Electrican. Arcos does not have any real presence there yet, but it shows the heightened risks facing the franchisee as it seeks to expand its operations throughout the region.

Yet as risky as it all is, that particular region saw some of the fourth quarter's best results as sales rose 25% on a better-than-27% increase in comps. Competition from Yum! Brands' (NYS: YUM) KFC chain couldn't impede its progress, but as Motley Fool blogger Matthew DiLallo points out, "None have the proven global brand of McDonalds that gives Arcos such a golden opportunity."

Let us know your views of the risks the company faces on the Arcos Dorados CAPS page and add the Latin American burger joint to the Fool's free, personalized stock-tracking service and see if it can afford to turn a blind eye to the rapacious South American governments dining on foreign stocks.

Stuck in the doldrums
When it comes to investing in natural gas plays, it all depends upon your perspective of the industry as to whether you'll view it as an opportunity or not. If you're a bear, you'll see the poor current economics of drilling -- prices at record lows, drillers pulling back hard on the reins of production, sporadic deployment of new technology to take advantage of this plentiful resource -- and decide it's not for you.

A bull can look at those same factors and see that while production is being cut, inventories are still growing, which means the low prices will entice more to adopt natural gas as an alternative to high-priced oil. Utilities are switching over from coal to gas because it's so cheap. And because new technologies are springing up to take advantage of gas, they're developing industries that will create large demands for it in the future. Today's depressed prices -- on gas and on industry stocks -- can be seen as tomorrow's monster opportunity.

Wastewater treatment specialist Heckmann is all these competing arguments rolled into one. It has the additional disadvantage of being in a niche accused of being all that's wrong with the gas industry: No longer is fracking seen as the problem, but rather disposal of the water that's a byproduct of the practice is now coming under scrutiny.

With Heckmann's shares down more than 40% so far this year, it actually makes it an attractive takeover candidate. Veolia Environnement (NYS: VE) , which is 13 times the size of Heckmann, might find it an attractive addition to its wastewater treatment business. Or perhaps Cameron International, which is almost twice the size of Veolia and is estimated to own half of the market, would find Heckmann a nice tuck-in target.

Wall Street is unanimous in its belief Heckmann will beat the market averages and CAPS members generally agree, with 97% of those weighing in marking it to surpass expectations. Let us know on the Heckmann CAPS page if you agree and add it to your watchlist to be alerted of any new crises.

Swing for the fences
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At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Arcos Dorados Holdings and Heckmann.Motley Fool newsletter serviceshave recommended buying shares of Veolia Environnement, Arcos Dorados Holdings, and McDonald's. 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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