Great Companies Do Exist in Today’s Market

Don’t let this lackluster stock market get you down or disinterested; there are all sorts of great little companies out there that are doing well. Once thing’s for sure: when you don’t have the tailwind of a bull market, you have to adapt your stock-picking criteria to reflect the market’s sentiment (or lack thereof, in this case).

From my perspective, investors have to pay a lot more attention to a company’s fundamentals and seek out value in the marketplace. When the broader market is moving sideways, even those stocks with solid momentum can be stuck in a rut. In the absence of a clearly defined stock market trend, institutional investors pick stocks with stable cash flows.

So, all you need to do is look for great businesses that have solid growth prospects and are reasonably priced on the market. Take, for example, Online Resources Corporation (NASDAQ/ORCC), a company that seems to match these criteria. This small-cap company has a successful track record of providing large financial institutions with Internet software that helps them interact with customers on the Web.

The company’s software helps banks, credit unions and other financial institutions facilitate on-line bill payment transactions, access account information, and view transactions. Online Resources trades for a reasonable valuation, expects solid long- term growth, and has no debt. This is precisely the kind of stock that can do well when the broader market isn’t doing anything. It’s the kind of story that just makes sense to institutional investors. It’s no Google, but it does not profess to be. It’s just a small company slowly, but surely, building a great business.

As I’ve written before, many of us on the Street do not feel good about the stock market, going forward. However, regardless of what is happening in the broader market, there are good companies out there and when large numbers of investors start sitting on the sidelines, great opportunities tend to pop up.