I have an insatiable curiosity about things.
This is particularly true when it comes to thestock market
andinvesting . There is little I love more than discovering
unique, off-the-beaten-trackinvestments possessing dramaticupside
potential. My curiosity thrives on ferreting out
under-the-radarstocks ignored by the traditionalWall Street
analysts and the mainstream financial media.
When everyone is talking about
Apple (Nasdaq: AAPL)
Goldman Sachs (
, there are scores of lesser-known firms in unusual and
seldom-mentioned niche markets quietly enriching investorsyear
These companies often have little in common. They can be from
diverse industries, have radically differentmarket capitalization
sizes and even be the underdog in a particular niche.
However, they are relatively unknown to the average investor,
receive little mainstreamanalyst coverage -- andoffer compelling
reasons to invest now or in the near future.
The first name on my list of obscure stocks is
American Vanguard Corp. (
. (Despite the similar name, this company couldn't be more
different from Vanguard Group, the behemoth financial company.) A
maker of agricultural pesticides, American Vanguard recently
delivered impressive fourth-quarter results and has an
incrediblybullish chart pattern right now, creating a
Theearnings per share of 39 cents in the quarter beat
theconsensus estimate of 4 cents and represented an increase of
23 cents over the same quarter of 2011.Profit surged nearly 80%
year-over-year, to more than $11 million, whilerevenue beat
consensus estimates by climbing 28%, to just more than $104
All the standard metrics revealed solid performance driven by
the firm's "ace in the hole" product to combat rootworm, which
has become a major enemy of corn farmers.
American Vanguard has a lock on the market for pesticides and
specializes in eliminating rootworm from cornfields. It has also
developed a unique delivery system known as a "smart box," which
protects farmers from the hazards of using the pesticide. This
demand has provided the company with an optimistic vision for the
In addition, American Vanguard has entered a
marketingpartnership with heavyweight
Monsanto Co. (
that is expected tosupport future results.
Complementing the positive results, I find the technical
picture provocative. The stock has fallen from around $33.50 in
mid-March to support at $28.
This support is of the triple-bottom variety, which is
signaling a near-term bounce in the works. Buying now with a
12-month target of $35 makes solid fundamental and technical
The next name on my list couldn't be more different than
American Vanguard -- but the stock price pattern is uncannily
Have you ever wondered what happens to government assets after
they are replaced or discarded? Here is your answer:
Liquidity Services (Nasdaq: LQDT)
This company provides auction services for the U.S. government
by operating websites like GovDeals.com and GovernmentLiquidation
. Think of the company as the government's version of eBay.
Various government sectors, including the Department of Defense,
use the auction system to dispose of assets and scrap that are no
longer needed. In addition, Liquidity Services also auctions
assets for dozens of international manufacturing
MaverickCapital hedge-fund manager Lee Ainslie owns more than
2 millionshares , and the company boasts a five-year
price/earning-to-growth (PEG ) ratio of 0.7. With amarket cap
close to $1 billion, thissmall-cap stock has been very volatile
Shares are priced at around 23 times earnings, but an average
of 22% earnings growth is projected during the next five years.
The company boasts about $45 million incash and a
debt-freebalance sheet .
However, shares have been decimated, dropping nearly 22%
during the past year. Management cutguidance as the company'sfree
cash flow is lagging compared with reported income. The auction
company is currently generating about 70 cents in profit for
every $1 reported asnet income . I am betting this is only a
short-termissue andwill be rectified during the coming
The business remains steady and government spending isn't
likely to end anytime soon, providing this company with plenty
ofinventory . Technically, shares have bounced off a triple
bottom in the $29 range and have pushed higher to the $33 area. I
like this stock right now with a 12-month target price of
Risks to Consider:
Both companies havemarket risk . Competitors, changes in
theeconomy and internalissues could strike at any time. It is
always critical to use stops and position size properly when
Action to Take -->
Consider American Vanguard for its technical picture and
Liquidity Services based on the technical triple-bottom bounce
combined with the expectations of improved free cash flow and
solid overall business. Buying now with a 12-month target price
of $35 for American Vanguard and $43 for Liquidity Service makes
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