Successful investing requires you to think independently and stick to your convictions. That's hard enough with stocks that are generally popular -- after all, in the stock market, there's a seller for every buyer. But it gets even tougher with stocks that can't seem to find good press or bullish investors anywhere. Of course, defying popular opinion has led many contrarian investors to great returns.
In that spirit, I've headed to Motley Fool CAPS to dig up some unloved stocks that have delivered big gains to shareholders over the past month. Our community of investors has put each of these companies on the bottom two rungs of the CAPS rating scale:
|
Stock |
30-Day Return |
1-Year Return |
Current CAPS Rating (Out of 5) |
|---|---|---|---|
|
Lehman Brothers |
31.4% |
(44.4%) |
* |
|
Dendreon |
30.1% |
(65%) |
** |
|
Fannie Mae |
25.1% |
(49.6%) |
* |
|
Washington
Mutual |
18% |
(71.3%) |
** |
|
Nortel Networks |
17.7% |
(70.3%) |
** |
|
Red Hat |
16.8% |
(14.6%) |
** |
|
Centex |
14.8% |
(50.5%) |
* |
Now, given CAPS' knack for accurately gauging winners and losers, I'm not recommending that you run out and buy these stocks! An index set up to short CAPS' least-liked stocks has outperformed more than 97% of all other CAPS players. That said, CAPS players have proved overly negative on some high-performing stocks. Are any of the stocks in our table the same sort of undercover rockets?
Providing the pep
Volatility is a great way to spot when investors have no idea what's going on. When a stock -- or the market as a whole -- swings wildly back and forth, I can almost hear my fellow "investors" shouting "buy, buy, buy!" only to be followed by a chorus of "no, wait -- sell, sell, sell!" and then back to an even more emphatic "BUY!"
Washington Mutual is a picture-perfect example. Since the beginning of March, the stock has moved on average nearly 8% per day in one direction or the other. That tells me that nobody has any idea what to think of this stock.
Last week, the stock got a major boost after it announced a $7 billion capital raise, ensuring that it will be able to continue operating -- at least for now. The party was relatively short-lived, though, and the stock gave up a good chunk of its one-day 29% gain as investors apparently pondered further what $7 billion of new capital does to their stake in the company -- not to mention the hefty dividend cut that came with it. Optimism scaled back a bit more this week, when WaMu announced its first-quarter earnings, which included $1.1 billion in net losses.
Combing CAPS
WaMu has attracted more than 2,000 players, and a majority argues that the current share price undervalues what's left of the bank. Kahunacfa, one of those recent CAPS bulls, posits: "The recent Washington Mutual sale of shares to a private equity firm sets a floor value for the stock of $8.75 per share. While I would prefer to buy at that price too, the current $10.60 is not too large a premium to pay for the strong company that will emerge."
However, among CAPS' higher-ranked All-Star players, WaMu has decidedly less support. One of those All-Stars, dmbeach, gave WaMu the ol' thumbs-down recently, saying: "This is probably not an uncommon pick. The odds this company survives (at least insofar as that means a non-zero value for the stock) are at best 50-50."
So what's your take? Is there good reason to get more bullish on WaMu right now, or are its banking days numbered? Head over to CAPS, and let the community of more than 97,000 Fools know what you think. While you're there, you can start your research on any of the 5,500-plus stocks that have ratings on CAPS -- including the ones we've talked about here today.
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