Piggybacking on the picks of great investors and money managers can often lead to big rewards -- especially when the stocks in question are beaten down. If Warren Buffett's buying railroads, perhaps you should look there, too. Does Bill Miller think financial stocks are beaten down? Maybe investigating more closely will help improve your own results.
Over on Motley Fool CAPS, our top-rated All-Star players represent the best 20% of our more than 95,000 professional and novice investors. I'm looking among them for those who've chosen one- and two-star stocks to outperform the market. The majority of CAPS investors may consider these stocks losers, but if our ace contrarians think otherwise, these picks might be worth a look.
Here are a few stocks that have gotten the nod from the cream of our CAPS investors:
|
Company |
CAPS Rating |
1-Yr Return |
CAPS All-Star |
Player Rating |
|---|---|---|---|---|
|
Basin Water |
* |
-19.7% |
StKitt |
95.07 |
|
Systemax |
* |
-27% |
AlGalatians |
97.58 |
|
LivePerson |
** |
-53.8% |
BravoBevo |
99.89 |
|
Colonial BancGroup |
* |
-56.6% |
RayInTheVillages |
98.92 |
|
Cott |
* |
-73.1% |
rbrosie4 |
94.80 |
Typically, there's a low-rated stock that has also enjoyed a large one-year run-up in its stock price, leaving me leery. Sure, stocks can continue to run, but these picks' high valuations -- and low ratings -- leave me cold. Not so this week, because all of these newfound objects of desire have fallen hard over the past year.
Rebuilding for tomorrow
Custom computer builder Systemax has had a host of problems, including an investigation of its TigerDirect subsidiary by the Florida attorney general for failing to pass along rebates to consumers. Over the past few months, however, Systemax picked up a bunch of failed CompUSA stores, along with the website of the same name, and it's rebranding its TigerDirect retail line as CompUSA.
Interestingly, when it announced record results last month, Systemax also declared a special $1.00-per-share dividend, much as it did last year, when it reported record results but otherwise missed the mark. But the stock suffered when it delayed its earnings release because, as it said, this was the first year it was required to comply with Sarbanes-Oxley. Apparently, it wasn't able to appropriately calculate the right date.
Taking over a failed brand, even if it does have some mindshare with consumers, will be a big task. Whether it's the right move is another question about which investors have a right to wonder; so far, they seem to be giving Systemax the benefit of the doubt. As CAPS player WeazG points out, CompUSA will provide it more retail locations to grow sales:
This stock was beaten down when they postponed 2007 earnings release. When it was released it blew away all expectations. CompUSA outlets give them added retail locations to drive revenue.
The market apparently agrees, because shares have bounced up 48% off its bottom. CAPS investor GreyRanger notes that with better margins, low valuation, and further clarity on the rebate investigation coming through, Systemax could be poised to grow:
Strong growth Internet and catalog tech sales company emerging from a black cloud of rebate investigation. Extremely low P/E and good EPS growth. Better margins then competitors and [expanding into bricks] and mortar with compusa purchase.
Finding value under rocks
So there you have it -- five low-rated laggards that have gotten big endorsements from some of the best and brightest investors in the CAPS community, although others aren't always so sure. If you want to add your two cents on these or any other firms, sign up to join Motley Fool CAPS, absolutely free.
