Stealth Stocks

"When I talk to a company that tells me that the last analyst showed up three years ago, I can hardly contain my enthusiasm." - Peter Lynch

There's something to be said for venturing where Wall Street doesn't go. If you pore over the largest percentage gainers over any time frame, one truth will remain - the greatest gains come from relatively unknown companies (i.e. stealth stocks). For example, looking at this year's list of winners, how many of these stocks were on your radar 12 months ago? Yet, investors are always drawn to stocks they know and feel comfortable with. The problem is that gaining an edge on those stocks is extremely difficult. And, to invest or trade well in anything, you always need to have an edge.

That's why I like to focus a lot of my research time on stocks flying well below Wall Street's radar. I use numerous stock screens to identify potential candidates, but I also do a little cheating as well. Case in point - IBD this morning has run a short profile on the Claymore/Sabrient Stealth ETF (STH), an ETF that I've been tracking since its debut (see prospectus). The reason? This ETF is focused on companies that don't have much analyst coverage with a bias to small and microcap companies. The methodology of the fund is also backtested to show very strong performance (i.e. an annual 10-year average return of 20.27% vs. 9.39% for the small-cap Russell 2000).

It is no coincidence that one of my favorite stocks in 2006 - US Global Investors (GROW) is also Claymore's top holding. In fact, Claymore is kind enough to share their holdings in this ETF with daily updates and they even provide the list in a spreedsheet format which is an added bonus. Below you'll find the top 30 holdings:

While most investors and traders have a difficult time finding undiscovered opportunities, you don't have to reinvent to wheel to find them anymore. ETFs like this will serve you well in providing a steady dose of new research ideas. Take full advantage of it!