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
|
One-Year Return
|
Current CAPS Rating (out of 5)
|
|
Valence
Technology (:VLNC)
|
32.2%
|
253.4%
|
*
|
|
Meritage Homes (:MTH)
|
21.5%
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(49.7%)
|
**
|
|
Odyssey Marine (NASDAQ:OMEX)
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15.2%
|
94.8%
|
*
|
|
Beazer Homes (NYSE:BZH)
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15.3%
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(73.2%)
|
*
|
|
ImClone Systems (NASDAQ:IMCL)
|
8.1%
|
40.8%
|
**
|
|
Packeteer (NASDAQ:PKTR)
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11.8%
|
(57.9%)
|
**
|
Data from Yahoo! Finance and Motley Fool CAPS as of March 19.
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 nearly 98% of all other CAPS players. That said, CAPS players have proved overly negative on some high-performing stocks. Are any of the stocks in the table above the same sort of undercover rockets?
Providing the pep
It's a wild time to be an investor in homebuilder stocks, and double-digit monthly swings like those at Meritage and Beazer over the past month are par for the course. The majority of builders -- save some savvy players like NVR (NYSE: NVR ) -- took on the role of land developer and currently carry piles of land on their balance sheets. Since the housing market headed south, investors have questioned how much value is left in that land, and they've been playing whack-a-mole with the valuations of the homebuilder stocks.
Currently, homebuilder stocks are trading at steep discounts to their book value, and the game du jour is trying to figure out whether those low multiples represent a reasonable valuation in the current environment or a deep value play. More recently, investors have been encouraged by the continued interest rate cuts from the Federal Reserve; their hope is that lower rates will help spur the real estate market back to life.
Combing CAPS
In the current market, it's tough to find any housing stocks that are on investors' good side. Meritage, rated two stars in CAPS, is about as close as it gets to a well-liked housing stock. The stock has 646 outperform ratings out of a total 965, though the majority of the CAPS All-Stars that have weighed in on it have stuck it with a thumbs-down.
On the bull side of the debate, CAPS All-Star TMFEldrehad has stuck with Meritage for a while, noting:
This pick carries some pretty hefty short-term risk given the tumble that homebuilders have taken, and are continuing to take -- this is a bit like trying to catch a falling knife. ... it's not a matter of if homebuilders rebound, but only when. This pick may well require quite a bit of patience and a strong stomach in the short-term, but I think the long-term investor will eventually be amply rewarded.
On the bear side, Allstar13913 counters that he'd rather collect points on a short than demonstrate a strong stomach:
With high interest rates, a cooling housing market, home values declining, and a subprime/mortgage bubble, I don't see high priced homebuilders going anywhere but down for the near future.
So what's your take? Is there good reason to get more bullish on Meritage right now, or is it going to continue heading down? Head over to CAPS and let the community of more than 89,000 Fools 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 5,500 stocks on CAPS.
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