Momentum investors love to back companies that have some 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, we should probably take notice. Perhaps the member has 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.
Considering that, on average, 96% of all members rating these companies think they will outperform the market, what might have turned some of CAPS' top players against these otherwise widely admired companies?
A rising tide of opportunity
Put strong earnings results up against a pullback in oil prices, and you have Transocean, whose stock has dropped like one of its jackup rigs down to the ocean floor. Well, maybe it's not quite that bad, but shares are down more than 20% from May. Quarterly profits for the driller nearly doubled, in part because of its acquisition of GlobalSantaFe last year, and dayrates continued to be strong. With debt levels shrinking, speculation abounds regarding either a special dividend or some share buybacks (particularly if the stock keeps falling) as a way to return value to shareholders.
But some investors are getting a little seasick over the lower utilization rates of the company's rigs as oil prices steadily fall. Are we looking at future demand weakness? Well, whether oil prices are falling or on the upswing, CAPS member RTPGuy thinks Transocean is able to roll with the waves.
[Transocean] is in the sweet position of the oil business. When oil prices go up, the oil companies want to find more and have more cash to pay [Transocean] for drilling services and rigs. When the price goes down, demand goes up and hence demand for drilling. Until there is a glut of oil, [Transocean] looks good. And with the rest of the world starting to get wealthy, the demand for oil will continue to increase until alternatives actually become viable.
Chew on this
You don't need to worry about call-ahead seating at most of the casual-dining chains these days, since the high cost of gas has supposedly forced people to eat at home more often. Lower consumer spending is socking burger joints such as Red Robin Gourmet Burgers (Nasdaq: RRGB ) , while Ruby Tuesday (NYSE: RT ) is running commercials hyping its new decor. Yet simple fare such as beer and wings seems to remain a finger-lickin' good treat for lots of folks, if Buffalo Wild Wings is any indicator. It was able to boost both sales and earnings in the most recent quarter.
Top-rated CAPS All-Star member wuff3t figures that B-Dubs is uniquely positioned. It has a compelling menu for the times, and since it hasn't saturated the market, it has plenty of room to grow: "Still such a small company in terms of market penetration, which means immense potential. Perhaps restaurant chains will suffer as the economy tightens in the near future, but things won't look this bad forever and this is a simple, strong concept that can survive and grow massively."
A dipstick for profits
Core Labs helps oil companies measure the amount of oil and gas in their reservoirs and helps them determine how quickly they can pull the goods out of the ground. Regardless of whether oil is at $150 or $100, this is a necessary service for the drillers. But is Core Labs taking a hit from the same forces that are pushing Transocean down?
In April, CAPS All-Star falcon2382 measured Core Labs' ability to continue assessing the depths of its opportunities: "[This] is a longer term play, although [I] wouldn't be surprised to see CLB do well in the short term as this Netherlands based company's revenue is generated from oil field testing and analysis with 70% of its business directed outside the United States. With operations in every major oil producing region in the world, it should continue to do well as [oil] companies are finding the need and the means (with oil prices currently so high) to test sample sections of the earth that before (when oil was selling for less) simply weren't worth the time, energy, and money."
Make lemonade from lemons
It pays to start your research on these stocks at Motley Fool CAPS. 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. We've seen the direction in which some investors think these companies are heading, but Motley Fool CAPS is more than what the pros think, even if they are All-Stars. Let's hear what you have to say!
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