7 Stocks Defying the Doubters

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)

La-Z-Boy (NYSE: LZB  )

23.4%

(30.7%)

*

Big Lots (NYSE: BIG  )

20.1%

11.9%

**

UTStarcom (Nasdaq: UTSI  )

17.9%

5%

**

Southwest Airlines (NYSE: LUV  )

14.9%

(3.7%)

**

Jones Soda (Nasdaq: JSDA  )

14.4%

(75.9%)

**

Urban Outfitters (Nasdaq: URBN  )

11.2%

39.9%

**

Quiksilver (NYSE: ZQK  )

10.9%

(25%)

**

Data from Motley Fool CAPS as of June 25.

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 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 unloved winners?

The naysayers
Airlines? Why would anyone want to invest in an airline right now? That sounds about as appealing as watching Celine Dion perform "You Shook Me All Night Long" (and just the thought of that gives me the willies).

Why should we skip airline stocks? Let me count the ways. First and foremost, there’s an oil-price spike that looks like a space-shuttle blastoff eating away at the airlines' collective bottom lines. Then there’s the economy: If we're not currently in a recession, then we're certainly in a period of very slow growth -- a period where consumers are far more likely to give their frequent-flier accounts a rest. Mix that all up with a dash of the usual airline concerns, like high capital costs and crushing competition, and we've got a pretty good case against any airline right now.

Nay-saying the naysayers
But wait! Could that be a shiny gem gleaming through the wreckage of the airline industry?

Though it's rated just two stars, there are nearly 800 players on CAPS who think Southwest Airlines deserves a look despite the company it keeps. The primary reason is simple -- Southwest had the foresight (luck?) to hedge the majority of its fuel costs. That means that while competitors are at the mercy of sky-high fuel prices, Southwest is paying around $50 per barrel. Not only does this help the bottom line, it also means that the company doesn't have to make customer-alienating moves like charging fliers for their first checked bag.

CAPS All-Star calrose23 recently took a liking to Southwest and gave it his thumbs-up approval. Defending his pick, he said:

Hate this market, but I love this stock. Lynch always said to look for a winner in a losing market because they will capitalize on the market. [Southwest has] oil prices locked in for the next two years. They look really good in airline industry. They keep it simple and reduce cost.

Make your call
So what's your take? Is there good reason to get more bullish on Southwest right now, or are its outperforming days numbered? Head over to CAPS and let the community of more than 110,000 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-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. He does not own shares of any of the companies mentioned. Jones Soda is a Motley Fool Rule Breakers selection. La-Z-Boy is an Income Investor pick. The Fool’s disclosure policy once had a scheme to broker gasoline hedges to consumers, but most people thought it was crazy. Oh yeah? Well, who's crazy now?


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 26, 2008, at 3:46 PM, JimEx wrote:

    It seems logical that the worse oil gets, the more attractive Southwest becomes.

    Most of the big players in the airlines industry will go bankrupt shortly if something doesn't change. Southwest is secure and profitable, and will be around to pick up the pieces when everyone else is gone.

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