Surprises are part of the game when it comes to picking stocks. Sometimes this can mean bad news, like one of your top stocks revealing that management has been backdating options.
Other times, though, the market gets caught off guard by positive surprises from stocks that most investors thought were down for the count. In this situation, investors who stood by the stock often break out into a chorus of "I told you so," as short sellers are forced to figure out just how much pain they can take.
To dig up some of these unloved stocks that have been defying naysayers, I'm turning once again to The Motley Fool's CAPS community. Each of the companies below had been given a one-star rating (the lowest) by our community of investors just 30 days ago:
|
Stock |
30-Day Return |
One-Year Return |
Current CAPS Rating (out of 5) |
|---|---|---|---|
|
Doral Financial |
32.4% |
(73.0%) |
* |
|
Medifast |
31.8% |
(48.2%) |
** |
|
Emisphere Technologies |
31.3% |
(59.9%) |
** |
|
InfoSpace |
27.0% |
47.3% |
* |
|
Sharper Image |
25.7% |
9.5% |
* |
|
Quantum Fuel Systems Technologies Worldwide |
20.1% |
(57.2%) |
* |
|
Archstone-Smith Trust |
20.0% |
26.6% |
* |
It's important to remember that some of these stocks, particularly the smaller, more volatile ones, could just as easily reverse these big gains over the next 30 days. In some cases, though, the strength could be a sign that the prospects for the company have changed for the better, or that it had been beaten down just a little too far.
So the question with these stocks is: Are they better than CAPS players had thought, or are they just singing that proverbial swan song? The best way to get a feel for where these guys are headed is to dig in and do some research. I thought I'd kick off with some thoughts on Quantum Fuel Systems Technologies Worldwide.
The fuels of the future
I had to take special notice of Quantum Fuel Systems Technologies Worldwide -- particularly because it has packed so many exciting words into its name!
The company has two primary segments. The first is the Quantum Fuel Systems segment, which produces fuel and battery systems for fuel-cell, hybrid, hydrogen, and alternative-energy vehicles. The other segment is Tecstar Automotive, a "second-stage manufacturing" operation that adds specialization and design features to OEM vehicles.
Quantum acquired Tecstar in March 2005, and since then the business has produced a pretty significant bump to Quantum's top line. Interestingly, though, the Tecstar business, at least right now, is not in the same business as the core Fuel Systems segment. Tecstar, as described in the company's filings, "engineer[s] and validate[s] certain appearance items to OEM standards, primarily for General Motors' pick-up trucks and sport utility vehicles." In fact, the segment, which provided almost 90% of the company's overall revenue for 2006, received almost 90% of its sales from GM.
What may be more of a concern is the fact that both segments are bleeding red. For the first nine months of the company's 2007 fiscal year, Tecstar lost $23 million in operations -- after adjusting for a $72 million goodwill impairment -- on $94 million in revenue, while the Fuel Systems group had a $10 million operating loss on $9 million revenue.
CAPS players have been particularly negative on the company; among CAPS All-Stars, the company has a record of 20 underperforms to eight outperforms. One such negative All-Star, nicvo, cites the company's declining sales, cash burn, dwindling cash, and sickly-looking balance sheet. He says, "If you have not yet shorted these shares, this is the last opportunity before the switch to the pink sheets, where they are bound to stay. This is a very safe bet to ride to zero."
So, do you think Quantum will deliver results in the black after all? Or will it continue to torch its cash? Head over to CAPS and let the community know what you think. While you're there, you can start your research on any of the other stocks listed above -- or any of the 4,500-plus stocks on CAPS.
More CAPS Foolishness:
Fool contributor Matt Koppenheffer didn't see these particular moves coming, but he's rarely surprised at Mr. Market's general tomfoolery. You can check out Matt's CAPS portfolio here, or visit his blog. He does not own shares of any of the companies mentioned. The Sharper Image is a Motley Fool Pay Dirt recommendation. The Fool's disclosure policy is never going to give you up, it's never going to let you down, and it's definitely never going to run around and desert you.
