5 Stocks Approaching Greatness By Rich Duprey October 31, 2007 0 Recommendations There will always be companies that are obviously great investments -- in hindsight. Through the rearview mirror, we know we should have bought Starbucks or Wal-Mart at their IPO and realized 10,000%-plus returns over the years. Yet for every stock out there screaming "buy me," there are others that simply give us a nudge in the ribs and a knowing nod. They may be tomorrow's obviously great investments, but how do we tell them from the thousands of pretenders?
The stars' walk of fame Over on the investor-intelligence site Motley Fool CAPS, we know these opportunities as four-star stocks, companies that rank higher than most of the other 5,000 stocks in the CAPS universe but are just shy of achieving true stardom. In the long shadows of stocks that garner the coveted five-star rating are top-tier companies approaching greatness.
While the full "secret sauce" of how the ratings are calculated is kept proprietary, there are three factors that influence a stock's star rating:
Whether a stock is rated "outperform" or "underperform" The length of time it is expected to perform (a few months or a few years) The ratings of the investors who make the picks Every player is rated, just as every stock is rated. The best and brightest of these players are considered All-Stars, and since they are correct more consistently than their peers, their opinions weigh more heavily in favor of (or against!) a stock.
Searching out of the spotlight So while all the attention might be focused on the five-star stocks, good investments slip under the radar with only four stars. Yet we can sift through the CAPS database to find some of these four-star companies approaching greatness:
Aluminum Corp of China (NYSE: ACH) Automatic Data Processing (NYSE: ADP) Hewlett-Packard (NYSE: HPQ) Nvidia (Nasdaq: NVDA) Vaalco Energy (NYSE: EGY)
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Chalifmann
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