3 low-profile stocks for high returns
The collective wisdom of an online community is tapped to identify under-the-radar companies that deserve more attention. With video updates.
This post comes from The Motley Fool's Rich Duprey.
Like the song says, investors are looking for love (or at least stocks to love) in all the wrong places. They'll pile into the momentum stocks everyone else buys but ignore lesser-known opportunities for fear of straying from the crowd.
Yet the stocks most likely to deliver outsize returns are often overlooked by Wall Street and Main Street, and thus are undervalued.
Below are three under-the-radar stocks that brim with promise. Each has garnered less than 100 active recommendations on MSN CAPS, despite earning analysts' estimates of double-digit long-term growth.
DragonWave (DRWI) makes radio transmitters used in data communications networks. The Canadian company foresees revenue growth this year as telecom companies buy its microwave-backhaul equipment to shore up their networks. The stock has a four-star rating from 83 CAPS members.
Occam Networks (OCNW) makes equipment used by telecom companies to offer bundled voice, video and broadband services. The Santa Barbara, Calif., company foresees growth from a service introduced last year that helps customers upgrade their networks to accommodate growth in on-demand and bandwidth-intensive services. The stock has a one-star rating from 43 CAPS members.
Post continues after video:U.S. Energy (USEG) acquires and develops energy- and mineral-rich properties. The Wyoming company has interests in oil, natural gas, molybdenum, geothermal resources and real estate. The stock has a three-star rating from 71 CAPS members.
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Naturally, we want you to look a bit closer at these stocks before buying. Perhaps investors are staying away from these stocks for good reason. Make sure there's nothing seriously wrong with a company before you plug it into your own portfolio.
Drag and drop
Does DragonWave still have contracts with Clearwire (CLWR), which accounted for 83% of its third-quarter revenue? Investors sure hope so. They're also crossing their fingers that AT&T (T) didn't choose another supplier for its network.
That's a lot of a-hoping and a-praying for developments that will keep DragonWave from flat-lining. The stock is down 18% so far this year as management tries to ease investors' fears of lost business by announcing a stock buyback program.
CAPS All-Star "brianpivar" says DragonWave presents investors with an opportunity to profit from others' concerns: "Good looking EPS for the next couple of years," brianpivar wrote. "Playing off fear that DRWI won't get ATT and Verizon VZ) contracts . . . even if (the company doesn't) get the contracts, this stock should still be at $14 by the end of the year."
Bringing broadband service to rural areas seems mundane, but the task is not without challenges. With billions promised for the endeavor, Occam Networks hopes to make it a reality -- perhaps even at a profit. Its networks were recently included in a list of materials recommended to service providers when applying for government grants for their build-outs.
Qwest Communications (Q) is one of the companies seeking federal stimulus funding for its $467 million rural broadband expansion plan. Taxpayers would foot the bill for three-quarters of the initiative, or $350 million, with Qwest funding the balance.
As Occam's customers win their own taxpayer-financed grants, CAPS member "fireinyoureyes" says its networks sales will expand very nicely: "Best and safest play on the Broadband Stimulus program. Some of their customers will win grants and loans, which will boost sales exponentially within the next year or two."
Molybdenum has one of the highest melting points of any metal, making it a preferred ingredient in many high-strength steel alloys. It is mined as an ore on its own, and recovered as a byproduct of copper mining. Thus it's not surprising that mining company Freeport-McMoRan (FCX) is the world's largest provider of molybdenum.
The metal might also be a rich vein for U.S. Energy, which could be paid as much as $400 million over the next several years if Thompson Creek Metals (TC) exercises its option to purchase up to 75% of its Mount Emmons molybdenum property.
In the meantime, U.S. Energy is diversifying its operations with oil and gas exploration projects. CAPS All-Star "HallShadow" says he thinks the company is lucrative in its own right:
"If you've done your due diligence, you'll know this stock is cheap as dirt from oil production increases alone, let alone the molybdenum and uranium 'imbedded call options,' so to speak, " HallShadow wrote. "This company has loads of cash, nominal debt and near-term growth prospects like few others."
Keep a high profile
Do you think any of these stocks are headed for higher returns? Log on to CAPS and let us know. Your opinion makes a difference. And CAPS is a good place to start your research into these and hundreds of other stocks. Read a company's financial reports, scrutinize key data and charts and examine the comments your fellow investors have made, all from a company's CAPS page.
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