Momentum investors love to back companies with the wind in their sails. Contrarian investors typically pick up cigar butts the market has tossed aside. So what do you call investors who turn against winners? Sourpusses? Shorts?
Over on Motley Fool CAPS, we sometimes call them the savviest investors around. When one of our All-Star players -- those whose stock-picking prowess places them in at least the 80th percentile of our community -- sours on a top-rated stock, perhaps we should take notice. Perhaps the player has found a chink in that highflier's armor, or a question mark in its financial footnotes. Or maybe it's just a hunch. That's why these tables aren't lists of stocks to buy or sell -- just starting points for further research.
Here's a list of stocks that some All-Stars have recently spurned:
|
Company
|
CAPS Rating
(5 max)
|
1-Year Return
|
CAPS All-Star
|
Player Rating
|
|
Banco Bradesco (NYSE: BBD )
|
*****
|
61.2%
|
Gemini846
|
93.96
|
|
Ametek (NYSE: AME )
|
****
|
20.5%
|
ActiveValueFund
|
99.21
|
|
Duke Energy (NYSE: DUK )
|
*****
|
(4.0%)
|
xthecritic
|
93.19
|
|
Dynegy (NYSE: DYN )
|
****
|
(10.9%)
|
daisychain144
|
96.60
|
|
Huaneng Power International (NYSE: HNP )
|
*****
|
(27.3%)
|
cobradon
|
99.90
|
Considering that, on average, 96% of all the investors rating them think these companies will outperform the market, what might have turned some of CAPS' top players against them?
A utility player
Public utilities are not the most exciting investments, but they do tend to be consistent performers over time. It was for that reason that along with Ma Bell and a few others, a utility was considered a "widows and orphans" stock, one which could provide for the needs of the neglected through steady dividend payments. A lot has changed in the marketplace, and probably no company can serve as the sole basis for someone's good and welfare, but utilities still have their role.
Duke Energy has been filling that role lately, learning from past mistakes and serving its narrowly defined focus of gas, electric, and telecommunications services. The Motley Fool Income Investor recommendation recently reported earnings that exceeded analyst expectations after backing out one-time expenses and discontinued operations.
A week ago, CAPS investor LuvABear wrote about Duke's movement into wind energy and being drawn to companies exploring alternative energy sources. "Duke bought the wind power [development] of Tierra Energy. Energy companies expanding in these areas is a place for me."
Another CAPS player, luckyagain, likes the stability offered in Duke's price while enjoying the benefits of a 5% dividend yield.
On the other hand, CAPS All-Star xthecritic explains the underperform call:
Sector Play - The utility sector is out of favor as a result of rising Inflation. Regulated prices make it hard on utilities to pass through rising costs to customers.
Make lemonade from lemons
We've seen the direction some investors believe these companies are heading, but Motley Fool CAPS is more than what the pros or amateurs think, even if they're All-Stars. It's where we invite you to share your thoughts and insights and add your voice to the debate. We're eagerly waiting!
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