The 'Seeking Alpha' Indicator: 2 Promising Stocks With Less Than 100 Email Alerts Followers

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Most investors dream of finding the next big stock. The one that will double, triple or even quadruple in the next few years.

One key to success has always been finding the fast growing stock still undiscovered by the market. One with huge growth potential that the market has ignored.

Focusing on the number of analysts covering a stock was always a key highlight of whether the investment community had discovered a stock yet. If the stock was only covered by 2-3 analysts, then one could expect the market reach to grow exponentially as the stock got bigger and attracted more analysts.

With the proliferation of the internet and social media, I'm not as convinced that this indicator works so much any more. Not to mention the distrust of Wall Street analysts after the market collapse in 2000.

That's why I'd like to introduce my new indicator. One that highlights the retail interest in a stock. It's the new Seeking Alpha email alert numbers.

Sure this is a highly arbitrary indicator but it very much highlights the amount of investors that actively track an individual stock. For example, Apple (NASDAQ:AAPL) has nearly 33K followers while Bank of America (NYSE:BAC) has 13K. Even more interesting is that Groupon (NASDAQ:GRPN) only has 716 followers while Zynga (NASDAQ:ZNGA) has 1,449.

Not sure this tells us what wasn't already known regarding Apple, but it is interesting that nearly twice as many people follow Zynga as Groupon. Zynga has clearly been the better IPO to hold, but both stocks have similar market caps. Both companies have 17 analysts following them so it highlights that both companies are equally known by the investment community, but clearly Zynga garners more appeal to investors.

Using this indicator I'd like to introduce 2 stocks that are relatively recent IPOs not followed by the Seeking Alpha community: Velti (VELT) with 96 followers and Green Dot (NYSE:GDOT) with 50 followers.

Even more interesting is that both companies have high growth rates and low PEG ratios. Clearly the market doesn't believe in these stories yet.

Speaking of the old analyst indicator, Green Dot has 23 analysts covering them so the story isn't exactly unknown. In the new world analyst estimates just aren't followed to a great degree any more. Or maybe they just aren't trusted.

More details on these potentially undiscovered gems:

This company is a leading global provider of mobile marketing and advertising technology and solutions. Isn't mobile advertising a hot sector that should garner a healthy multiple?

Velti though just reported 63% revenue growth over Q4'10 and 95% adjusted EBITDA growth, yet the stock trades at a sub 14x forward earnings. 2012 revenue is estimated to grow roughly 50% followed by another 35% in 2013.

At that level, the stock would only trade at 2x sales. Not much of a multiple compared to the cloud software stocks coming out with IPOs with 10x revenue multiples.

The company had an IPO back on January 27, 2011 at an offering price of $12. Nearly 14 months since the IPO, Velti still trades below the closing price from that first day.

Now new investors get the chance to invest in a relatively new IPO that has fallen through the cracks. Considering only 96 investors follow it on Seeking Alpha, it could run for awhile until it reaches max attention.

Green Dot
This company is a provider of widely distributed, low-cost banking and payment solutions to U.S. consumers. Green Dot has a prominent presence as a prepaid debit card offered at Wal Mart stores so surely the investment community knows the company.

The stock had its IPO back in mid-2010 so it isn't as new of a IPO as Velti. The stock even providers a better deal compared to the IPO pricing. Green Dot went public at $36 and traded up over $40 on the first day. The stock now trades $28.

Again though the company has expected growth rates above 20% with a forward PE of 12. This company trades at virtually half its growth rate. This was virtually unheard of when investors trusted analyst estimates.

More amazing about this stock is that 23 analysts follow them and they expect the company to have nearly $600M in revenue this year. It isn't all that small of a company or under followed by investment firms.

Clearly though the Seeking Alpha indicator suggests that the investment community doesn't trust or understand the stock. Only 50 followers places it towards the low end of any stock we've ever checked.

Worth noting is that Visa (NYSE:V) trades at considerably higher multiples with half the growth rates. Clearly the market expects it to be able to eventually crush Green Dot or the valuation gap wouldn't exist. Note that Visa has 2,374 followers.

The Seeking Alpha indicator will be worth following over the next few months and years. Maybe I can convince them to graph the progression of followers to expand on the ability of the indicator. For now though, until these stocks reach 500-1,000 followers I'll consider them under followed by the sophisticated investment community that uses Seeking Alpha.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GDOT, VELT over the next 72 hours.

Additional disclosure: Please consult your financial advisor before making any investment decisions.