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 members -- 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 member'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 stocks that some All-Stars have recently spurned:
Sources: Yahoo! Finance, Motley Fool CAPS. NA = not available.
Considering that, on average, 95% of the CAPS members rating these companies think they will outperform the market, what might have turned some of CAPS' top players against the stocks?
No anemic results
As rumors of Titanium Metals being a potential buyout target cooled, so did its shares. The aerospace industry tends to comprise a large portion of titanium producers' customers, and it has faltered as the continuing delays in Boeing's (NYSE: BA) production added to worries. Shares of Titanium Metals and RTI International (NYSE: RTI) have fallen by more than 10% over the past month.
But CAPS member joerancho67 finds Titanium Metals to still be "worth a play" considering its dominating position in the metal's market: "This is an intresting company -- kind of a nice sideways mining play, yea I know it's been beaten up lately, [demand] in emerging markets in offshore oil and gas production and the fact that they have 28% of the world's market share in Titanium -- it's worth a play."
Another titanium producer being affected by Boeing and the rest of the aerospace industry is Allegheny Technologies, which reported an 18% decline in second-quarter profits. That has analysts worried that a cycle of weakness in aerospace will continue to drag the metal makers down. Still, CAPS members like orchid4u choose to see the silver linings draped over Allegheny's earnings:
ati had such good earnings and almost no debt. The economy has hurt earnings but they are still better than a lot of companies, with higher margins and still little debt. I think once the economy improves they will regain all the overdone reaction to their reduced earnings and the field they are in and they will be a huge gainer. Maybe before the economy picks up if they make enough from new airplanes being built. I don't know. I just picked it out several months ago because it had such great numbers. Now you can get in a lot cheaper than I did when I picked an early bottom (Big Mistake) and rack up even more than I will. But beware. It may stay down a while first.
Oh, dear!
Darling International just might become the darling of the environmentalists let alone the investor community if biofuels take off. Darling takes inedible meat-processing byproducts and used restaurant grease and oils and converts them into ingredients that its customers use to make soap, pet food, feedstock, and biofuels.
While chatter about an Allegheny takeover are dying, CAPS members like Fully472 find Darling to be in an excellent position to be bought out:
Another rock-solid company that is bound to be taken over by an energy company for their Bio-Fuel potential. They have solid infrastructure for their job and they're the only game in town; also helps that the financials are kept solid by good managers. Will be snapped up soon by an energy company and we'll all profit from that!
Make lemonade from lemons
It pays to start your research on these stocks on Motley Fool CAPS. You can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. And let us know what you think about these stocks!
Closed for 15 months – opening 10 days only! Get notified ahead of time as our expert portfolio manager invests $1 MILLION in the best opportunities from across The Motley Fool’s premium investment services. This is the first open since August 2008, by invitation only. Enter email below.
Terms & Conditions
RSS Headlines
Fool UK