Wall Street's Best Hidden Stocks
Dec 27th 2011 11:02AM
Updated Dec 27th 2011 4:38PM
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.
CAPS Rating (out of 5)
No. of Wall St. Picks
|American Capital Agency (NAS: AGNC)||****||4||4.6|
|Great Panther Silver (ASE: GPL)||****||1||26.7|
|NXP Semiconductors (NAS: NXPI)||*****||5||8.8|
Source: Yahoo! Finance; Motley Fool CAPS.
Remember, without much 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.
Putting a roof over your head
The National Association of Realtors lowered by 14% its estimates on the number of existing homes sold since 2007 because a glitch in its system led it to double-count some sales and include some new-home sales in its figures. Worse, foreclosures are still an albatross on the industry, with almost half of all home sales in November being either short sales or sales of bank-owned properties. That, coupled with persistently high unemployment levels, led the Federal Reserve to reiterate its commitment to keeping interest rates artificially low.
Although quality mortgage REITs like American Capital Agency benefit from the low interest rate environment by making money on the difference between short- and long-term rates (the spread), borrowing low-cost short-term money and investing it long term for higher returns, mREITs try to juice their returns further by deploying leverage. ARMOUR Residential REIT (NYS: ARR) , Newcastle Investment (NYS: NCT) , and others take on debt to bolster returns, but in so doing, expose themselves to greater risk in the event the spread narrows.
With American Capital Agency carrying a dividend that yields close to 20%, CAPS member badducky is satisfied while watching how it all plays out: "I have been sitting on this dividend for over a year, and it's been one of my happy stories of the stagnant market. I don't know how much longer this dividend will continue, but I love getting paid to wait and see."
Let us know in the comments section below or on the American Capital Agency CAPS page if you think this will continue paying such juicy dividends, then add it to your watchlist to be notified of the latest developments.
This stock is still precious
A series of misfortune and missteps led Great Panther Silver to badly miss earnings, but as one of the great undiscovered silver opportunities out there, it has the chance to be a big win for investors in 2012, of which I consider myself one.
The miner suffered from lower-grade ore than it was accustomed to finding. The problem first arose in the second quarter and spilled over into the third, leading to an 18% decrease in silver equivalent ounce production. Then one of its metal traders had smelter issues that led to delays in concentrate shipments. But it's been a difficult year for a number of silver and gold miners; even Coeur d'Alene Mines (NYS: CDE) , which has held up reasonably well, is still trading lower now than where it started the year.
CAPS member MajorBob04 is willing to wait for Great Panther to pounce: "Any hint of good news will turn the fading stock price around. May take a couple quarters, but I expect good results soon."
Dig into the thoughts of other investors on the Great Panther Silver CAPS page and add the miner to your watchlist, then let us know in the comments section below whether it will make the return trip up.
While Identive Group (NAS: INVE) is flat from where I picked it to outperform the market earlier this summer, the small but growing near-field communications industry is one that strikes my imagination.
Near-field communications, or NFC, is a technology that allows communication over very short distances -- typically just a few centimeters. Using a smartphone, a user can touch the phone to an NFC tag and immediately be connected to a website, dial a phone number, or launch an app to show information such as business details or points of interest.
That's why investors might want to pay closer attention to NXP Semiconductors, a leader in the NFC niche. It recently paired up with Identive to produce an NFC tag that will be able to be read through glass, making the technology even more useful for consumers who want to access displayed data by waving their cell phones in front of it. And because it consumes only 144 bytes of memory, cell-phone makers can preload their phones with promotional URL addresses or other content.
While I've also rated NXP on CAPS to outperform the broad market indexes and aacole finds near-field communications to be a "game changer," the chip maker is involved in more than just that specialty, which makes it an interesting play.
The stock's low profile also presents an opportunity to enter a position while it's still discounted, as it trades at less than half its 52-week high. Add NXP to the Fool's free portfolio tracker and tell us on the NXP Semiconductors CAPS page whether it's near enough to be a great portfolio addition.
Swing for the fences
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At the time this article was published Fool contributor Rich Duprey owns shares of Great Panther Silver, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of NXP Semiconductors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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