Stocks on the Road to Greatness
Apr 5th 2012 2:46PM
Updated Apr 5th 2012 2:48PM
For every stock out there screaming, "Buy me," others simply give us a nudge and a nod. While all the attention may 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've got a pair of stocks on their way to fame and glory.
1-Year Revenue Growth
1-Year EPS Growth
1-Year Stock Return
|InterDigital (NAS: IDCC)||$1.6 billion||(24%)||(42%)||(31%)|
|Southern Copper (NYS: SCCO)||$26.6 billion||32%||50%||(23%)|
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 merit your attention.
In the sight of greatness
As a result of hyperactive imaginations on the part of management and investors, shares of InterDigital soared last year as merger mania swept over the market and thoughts of multi-billion dollar payouts for its patent portfolio drove the stock to a double in a matter of days. Reality has a way of puncturing such balloons, though, and InterDigital's patents, while undoubtedly valuable, were not nearly worth what some thought they would fetch.
Yet even if no one was willing to pay up for the wireless leader's IP portfolio, that just means investors will profit in the long run because there are trends at play that will drive this stock higher organically.
There's a looming 4G LTE network tsunami that is only just building up momentum. Verizon (NYS: VZ) and AT&T (NYS: T) have widely deployed their 4G networks, and Sprint is scrambling to catch up in anticipation of Apple unleashing upon the world a 4G-capable iPhone sometime this year. When the tidal waves finally crash on the shore, InterDigital's patents will be seen as even more valuable than they were last summer.
According to the analysts at Strategy Analytics, some 67 million LTE handsets will ship this year, a tenfold increase over 2011 -- but that's only the beginning. In-Stat says that will grow to 157 million by 2015, and ABI Research predicts 254 million the following year. It's going to be 4G LTE all day, every day. Yeah, analysts can get irrationally exuberant when it comes to predicting parabolic growth into the future, but there's little doubt that this is the next wave, and InterDigital, with its key 4G LTE wireless patents in hand, will be riding that wave higher.
With nearly 1,300 CAPS members weighing in on InterDigital, it's not surprising why 97% of them see it outperforming the market indexes. Add InterDigital to your watchlist to dial in to this mounting phenomenon, and tell me in the comments section below whether my decision to rate it to outperform will have me hangin' 10 or hanging by a thread.
A rich patina
Better economic data here at home may be buoying spirits, but a comparatively dour outlook out of China is weighing on copper's prospects this year. Although prices are nearly 13% higher this year, China is the world's largest consumer of the metal -- absorbing 40% of all production -- so any doubts that cast negatively on its economic engine's ability to run at full bore will likely have an impact on the fortunes of copper miners like Freeport-McMoRan (NYS: FCX) and Southern Copper.
Although it's one of the largest integrated copper companies in the world, Southern Copper actually sells little into China right now (about 5% of Freeport's revenues come from China), but it was looking to break into the market next year. Europe and the U.S. account for almost half its sales now, but with mine expansion almost complete and government approval of additional projects in the queue, Southern Copper wants to expand production by 30% this year to 600,000 tonnes. China is an obvious outlet for that additional output.
Yet like InterDigital, 97% of the CAPS members rating the copper giant believe it will beat the Street. I tend to be bullish too, even though I'm skeptical of the economy's recovery here, because I see the Federal Reserve's policies ultimately inflating commodities. As a result, I've made a CAPSCall for Southern Copper to outperform the market.
Add the copper miner to the Fool's free portfolio tracker and let us know on the Southern Copper CAPS page or in the comments below if you're also taking a shine to it.
A great opportunity for you
Investor sentiment suggests 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 this article was published Fool contributor Rich Duprey owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and InterDigital. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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