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 only a handful of 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.
(out of 5)
Wall Street Picks
|ClickSoftware Technololgies (Nasdaq:CKSW)|
|Depomed (Nasdaq: DEPO)|
|Yongye International (Nasdaq: YONG)|
Source: Yahoo! Finance; Motley Fool CAPS.
Remember, without 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
The hiccups in tech spending are catching up with workforce-optimization specialist ClickSoftware Technologies, but they still can't undermine its base. While Cisco's (Nasdaq:CSCO) earnings put the danger in clear perspective for equipment companies, Oracle(Nasdaq: ORCL) showed that software at least remained a key opportunity for investors. That's a hopeful sign for ClickSoftware, which is looking for full-year revenue growth of 19%.
That's down a little from earlier this year, when it expected as much as 22% in year-over-year sales, but contract-signing delays have slowed progress. ClickSoftware does expect the orders to be filled sooner rather than later.
That could explain why ClickSoftware's stock remains buoyant. Shares are up 17% over the past three months, which based on its growth prospects gives the scheduling shop an attractive valuation. An enterprise value-to-free cash flow multiple of just more than 12 make it looks relatively cheap, too, since Oracle goes for 16 times its cash flows.
The CAPS community is pretty confident as well, with 98% of those who've rated ClickSoftware believing it will turn in market-beating performances. You can just click to add it to your watchlist and have all the Foolish news and analysis aggregated for you in a single place.
All charged up
Depomed has also held up well after stumbling through a recall of certain contaminated lots of Glumetza, a Type 2 diabetes treatment, and having to extend the timeline for when it would resume normal supplies. The pullback hurt Santarus, too, since it has a co-promotion agreement with Depomed for Glumetza. Santarus also took a hit from generic sales of Zegerid, its acid reflux therapy.
Depomed's stock is still up 60% year to date, and it's doubled since its July low point; investors undoubtedly consider the setback merely temporary. Because it is also entitled to receive an additional milestone payment from Janssen, plus royalties on future sales of a sodium glucose transporter 2 inhibitor, CAPS member RDEPVB thinks Depomed's biggest worry is downright enviable:
Proven technology, great pipeline, self financing and 2 potential Billion $ products. Just hope the company doesn't get bought in the next few years.
Let us know on the Depomed CAPS page how soon you think the supply of good news will resume.
A utility player
Severe flooding in China has killed thousands, ruined crops, and hurt agriculture players such as China Agritech (Nasdaq: CAGC). The company saw sales of liquid and granular fertilizers tumble in flood-ravaged areas. Over the past six months, Ag Feed Industries(Nasdaq: FEED) fell 24%, China Green Agriculture is down 17%, and Agria is 8% lower.
Surprisingly, though, Yongye International has not been hit like the others, and its shares trade 10% higher than they were back in May. Shares have actually fallen a bit from their most recent peaks, but the steady stream of small-cap stock shenanigans emanating from China has undoubtedly rattled investors.
With nothing to implicate Yongye in any of these scandals, its forward multiple below six suggests that investors are just throwing the baby out with the bathwater. When you look at its growth prospects, the minuscule valuation the market is assigning the company leaves the impression there's plenty of upside potential, with little downside risk.
CAPS member legallad praises Yongye for enlisting a big-name auditor to monitor its books:
Tremendous 3 yr growth and IMPROVING margins. Reliable big 4 auditor in sector that lacks credibility of financials. The yuan is appreciating vs dollar for foreseeable future. And lastly - everybody's gotta eat, even in China.
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.
© 2010 UCLICK L.L.C.