Momentum investors love to back companies with the wind in their sails. Contrarian investors typically pick up the 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's 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 highly rated stocks that some All-Stars have recently spurned:
Source: Yahoo! Finance; Motley Fool CAPS. NA = not available. EPS = earnings per share.
Considering that, on average, 97% of all investors rating these companies think they will outperform the market, what might have turned some of CAPS' top players against the stocks?
Not managing well?
When a company operates in an industry that has been having a gusher of profits, but its own production capabilities remain below expectations, it's likely that investors will start to question its ability to deliver. With natural gas and oil prices rising at a torrid pace, it's natural to expect that drillers and other companies in the space will report similar gains, yet Brigham Exploration recently reported that its revenues were affected as a result of lower production from its wells, along with losses on hedges. What allowed the company to post a 2% rise in revenues for the quarter was those higher prices.
That just might have been what was on the mind of top-rated CAPS investor Hassjo when giving Brigham the thumbs-down with a simple question: "Show me the money?"
Without question, the naysayers are in the minority when it comes to Brigham, as many bullish investors look favorably at the well-finding technology it brings to the field. Like Motley Fool Hidden Gems recommendation Dawson Geophysical (Nasdaq: DWSN ) , Brigham uses 3-D seismic imaging technologies to locate the best area for placing wells, as CAPS player NYM42 notes in this recent pitch: "Brigham is finding new ways to drill for oil and find the natural resources that we need in this country. With their latest and most advanced technology, the prices for oil and gas may drop if we can find the oil and gas reserves to sustain this country's economy."
Brigham's stock has been enjoying upward momentum lately as it got a boost from XTO Energy (NYSE: XTO ) moving into the Bakken oil shale play where Brigham has been working, underscoring the confidence Brigham has put in the area being the next big area for oil. Yesterday, shares surged almost 25%, ending the day up 15%, on news that it had completed two new wells in Mississippi and restored a third to full production in Louisiana.
Sometimes, Hassjo, it's just tough going against the crowd.
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 think, even if they're All-Stars. It's where we invite you to share your thoughts and insights. We're eagerly waiting!
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