Humans are critical of mistakes. We like to point out wrongdoings rather than accept a job well done. Everyone is different and will do things their own way, it's time we accepted it.
If we were all the same, there would be no way for Foolish investors (capital 'F') to profit when stocks get sold off irrationally, or are overlooked for one reason or another. It's our job, as savvy investors, to find companies before anyone else has realised their potential.
They could be small caps yet to be discovered or large established blue chips which other investors have sold off disproportionately. It can be tough work and the greatest investors know it doesn't always pay off.
Instead of finding turnaround stories – which Warren Buffett says "rarely turn" – I prefer to find growth stories in the many small to medium-sized companies listed on the ASX. Here are three stocks which I believe the market has failed to recognise as having great long-term value.
The first of which is Collins Foods Ltd (ASX: CKF). It operates and manages KFC and Sizzler stores – which are very well-known brands – in Australia and Asia. Since the beginning of the year, it's up 16% on expectations of stronger earnings in 2014. After following it for a while, I bought some shares and expect the stock to outperform the index. It also pays a great dividend.
Cash Converters International Ltd (ASX: CCV) is a top stock many investors dumped after changes to the Australian lending environment for small loans which Cashies offers its customers. Its share price was also rocked after news emerged of a potential lawsuit. However fundamentals remain the same. It continues to dominate its market. It has huge exposure to the UK recovery and has recently started its venture in New Zealand. In my opinion, anything under $1.00 is really good value.
Donaco International Ltd (ASX: DNA) is a casino operator and owner with assets in Vietnam. Last financial year, the company reported operating revenue up 41% and net profit up 41%. It will benefit from a lower AUD and its new hotel is likely to be opened around half-year 2014. It has no debt and its nearest competitor is over 400km away. It will benefit from the long-term rise of Asia's middle class.
Foolish takeaway
With the S&P/ASX 200 (ASX: XJO) (^AXJO) and many big name growth stories riding near all-time highs, it's time to find smaller but established businesses which will benefit from the macroeconomic trends in place all the same. These three companies have established businesses, are making profits and growing revenues. I'm betting they'll outperform the index in 2014.
