also provides software to analyze the images and tools to perform minimally invasive biopsies. Crane says the stock, which had fallen from $56 to $47 at the time of this writing, has as much as a 40% upside, which could send the price over $60 in 2007.
Crane expects Tetra Technologies (NYSE: TTI), another stock that has fallen out of favor, to turn around. The stock slid from $32 to $22 with the drop in oil prices. Two of its three divisions are tied to oil and gas exploration and production while the third provides well abandonment and decommissioning services, which are in great demand after last year’s hurricane season. Crane says the company’s earnings could grow 30% and the stock could gain 33%. Intermec (NYSE: IN) is another one of Crane’s picks. The company focuses on radio frequency identification, which is similar to bar codes but allows tagged items to be scanned at a much faster rate while generating more information. Wal-Mart is an early adopter. “As the market materializes,” says Crane, “Intermec’s profitability will increase, and I expect the stock price to exceed its former highs sometime in the next 12 months.” If Intermec, now selling around $26, gets back to $39, that would be a 50% gain.
After a long spurt, oil prices backed off a bit in late 2006, driving down stocks in the energy sector. At some companies, the sell-off might have gone too far. Ensco International (NYSE: ESV), for example, which provides offshore drilling services, is down more than 25% from its April 2006 highs because of weakness in oil and gas prices, according to Jerry Jordan, manager of Jordan Oppor
tunity Fund (JORDX). “In 1997, ESV was a $40 sto
ck with peak earnings of $2.25 per share and crude oil at $22 a barrel,” he says. “Now it’s still a $40 stock, with peak earnings of $8 to $10 and crude oil at $60.” Jordan puts a target price of $60 on the stock, about 50% higher than the current level.
HIDDEN GEMS
If you’re reluctant to select your own sleeper stocks, you might be interested in Claymore/Sabrient Stealth (AMEX: STH), a new exchange-traded fund designed to track the Sabrient Stealth Index of companies flying under the radar screen of Wall Street analysts. “Our index generally includes companies that are followed by no more than two analysts,” says Scott Martindale, senior managing director of Sabrient Systems, an equity research firm in Santa Barbara, California. Sabrient’s holdings include Insteel Industries (NASDAQ: IIIN), a manufacturer of wire products, and NewMarket Corp. (NYSE: NEU), formerly Ethyl Corp., which makes petroleum additives. Through Oct. 4, Insteel was up 135%, year-to-date, and NewMarket was up 123%.
S. Lamont Turner, 59, a retired postal worker in Baltimore, is one investor who prefers the mutual fund approach to buying these low-flying stocks. He and his wife, Diane, have a balanced portfolio of funds with an allocation of about 20% to mid-cap funds. “Medium-sized companies want to be like the big ones, so they’ll take more