These Stocks Can Add Gravy to Your Portfolio

The turkey might be the reliable stalwart of most Thanksgiving tables, but it is often the gravy, stuffing, and other extras that end up being the stars of the meal. It can be much the same thing with an investment portfolio.

The bulk of most people's equity exposure should be a solid, reliable core--the turkey. It could be a broadly diversified index fund, an actively managed holding, or even a small portfolio of stocks with great competitive advantages and a solid business model. This main dish of equity holdings is there to provide the bulk of a portfolio's sustenance. There is of course still going to be some risk, but the hope is that these stocks with wide or narrow economic moats will be able to withstand economic downturns better and be able to throw off free cash flows for years into the future.

But the core can get a little boring and dry sometimes. By their nature, they are long-term holdings, and it might take years, if not decades, to see the full potential. Finding gravy, stocks that might not be long-term holdings but that have great return potential, can spice things up.

Adding some gravy to your portfolio can have a few advantages. The most obvious is the potential for more return as a result of the extra risk you are taking. The second advantage is behavioral. The hallmark of a great core investment is that it isn't all that exciting. If you are the type of investor who likes to constantly check in and fiddle with different holdings, a gravy investment might give you a sandbox to play in without messing up your long-term goals.

But buying just any stock with a lot of uncertainty and hoping for the best is not a great strategy. It is still worth the time to find cheap shares, those trading at a deep discount to their fair value, as buying very expensive gravy is a good way to ruin any portfolio. To find cheap gravy stocks, you can use the  Premium Stock Screener to find companies that are no-moat, have high or very high fair value uncertainty ratings, and have Morningstar Ratings for stocks of 5 stars.

Here are three firms that passed the screen. Run it for yourself by  clicking here:

 Terex (TEX)
From the  Premium Analyst Report:
Through acquisitions, Terex has taken additional share in the global equipment market. Although the recent economic downturn crushed its volume and profitability, Morningstar analysts think the firm stands to benefit from its strong market position as demand rebounds. That said, we've become increasingly concerned that renewed strength could face a material delay if weak economic conditions persist.

 TRW Automotive Holdings
From the  Premium Analyst Report:
Even though TRW has yet to put together a string of annual economic profits, we think that year number one of potentially several more years to come may have been 2010. Morningstar analysts expect future revenue growth from government regulations in numerous countries and developing markets' automakers looking to sell vehicles in established markets. In our opinion, TRW possesses the traits of a successful auto-parts supplier that can consistently generate economic profits, including a global manufacturing footprint, and has a diversified customer base, very close, long-standing customer relationships, high customer switching costs, and moderate pricing power.

 Plains Exploration
From the  Premium Analyst Report:
By its own admission, Plains Exploration was late to the party for U.S. unconventional drilling. The firm remained focused on its legacy California heavy-oil properties until 2007, when it made a $4.5 billion bet on conventional natural gas with the acquisition of Pogo and a purchase of assets in the Piceance Basin. By the end of 2008, Plains had divested close to $3 billion of these acquired properties in order to make a second big bet on natural gas, this time through a $3.2 billion joint venture with Chesapeake in the Haynesville shale. Plains later added to its unconventional assets with a $600 million purchase of Eagle Ford shale leasehold in 2010. With its portfolio reshuffling now largely complete, Plains' future looks bright. The firm's mature, cash-flowing assets in California should help fund development across its emerging plays, while its balanced production and reserve mix should support attractive economics even in the face of continued low gas prices.