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Fool's 3 Hidden Gems now (June15)

Fool's 3 Hidden Gems as of June 15>

QSII
IART
PRAA

Quality Systems

Quality Systems [Nasdaq: QSII] provides software to help private-practice physicians maintain patient records in a digital format. No more manila folders and lost records for your family doctor: It's time to join the computer age!

The stock is still attractive even though it has had an extraordinary run, more than doubling since my recommendation last April. Though it trades in the mid-$60s today, I think this is a $75-$85 stock in the next three years.

Integra LifeSciences

Integra LifeSciences [Nasdaq: IART] is a 15-year-old maker of medical devices and implants used in neurotrauma and neurosurgery. Diverse product lines include cranial monitoring systems for head trauma victims, instruments for spinal surgery, artificial skin for burn victims, and absorbable wound dressings for tissue repair. The company is run exceedingly well, spinning out free cash flow, effectively integrating acquisitions, and delivering market-beating returns. Integra generates roughly $32 million in excess cash per year, and I value this $975 million business just south of $2 billion over the next three years.

Portfolio Recovery Associates

Finally, Portfolio Recovery Associates [Nasdaq: PRAA] buys defaulted debt from credit card companies and retailers, and then collects back two to three times its original purchase price over the several years. This company is marked by a strong, honest, shareholder-friendly management team that practices conservative accounting and is the only one in its industry to expense stock options. Its return on equity -- a measure of management effectiveness -- dwarfs the industry averages.

The stock is up nearly 50% since it was recommended in Hidden Gems. Despite the run-up, however, this is a strong player in a growing industry, and I see market-beating potential for the business over the next several years.

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