Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and see what the 10 best stocks of the past decade were.
But I'm more interested in the tools that can help me find new stock ideas, as well as provide the resources necessary to evaluate tomorrow's greatest companies -- just like Motley Fool CAPS.
We've enlisted CAPS to screen for top contrarian stocks and get the story behind them. CAPS' nifty screener will help us find stocks with:
- A market cap of at least $500 million.
- A long-term-debt-to-equity ratio of less than 0.5.
- A share price at least 50% below its 12-month high.
- An earnings-per-share growth rate of at least 15% over the past three years.
- A price-to-earnings ratio of less than 25.
Then we'll tap the collective intelligence of our 115,000-plus CAPS members to see whether these companies present real opportunities -- or whether the numbers fail to tell the true story.
Opinions with the numbers
Here's a sampling from the list of stocks our contrarian screen pulled up today.
|
Company
|
% Below
12-Month High
|
CAPS Rating
(5 max)
|
|
Terex (NYSE: TEX )
|
58%
|
*****
|
|
Manitowoc (NYSE: MTW )
|
58.2%
|
*****
|
|
MEMC Electronic Materials (NYSE: WFR )
|
58.2%
|
****
|
|
Allegheny Technologies (NYSE: ATI )
|
61.2%
|
****
|
Data and star rankings from CAPS. All data as of Sept. 5.
Terex
Mining and construction equipment maker Terex took a crushing blow last week when it cut its 2008 earnings outlook, and investors knocked shares 20% lower. But even with the rapid growth appearing to ease, overall Terex remains fundamentally strong with its sales backlog up 50% since the start of the year.
Other major equipment makers such as Caterpillar and Diana Shipping (NYSE: DSX ) continue to hold bullish long-term views for commodity demand as well. So while shares of Terex keep spiraling downward, a rock-bottom P/E that now sits at 5.5 no doubt has many value investors licking their chops. The 1,100 CAPS members rating Terex are largely bullish as well, with nearly 98% believing Terex is poised to beat the market.
Manitowoc
Joining Terex in ultra-low P/E land is Manitowoc, a crane and food service equipment manufacturer that currently sits with an earnings multiple of 6.8. Some investors believe the company is poised for a rebound though, as it is considered an industry leader trading at a below-average value.
With about 60% of Manitowoc's revenues coming from overseas, the company has good regional diversification built in. The company's landing of a big $2.7 billion bid to pick up food services equipment firm Enodis will help it diversify further, though the acquisition will add some significant interest expenses to the balance sheet. The market has obviously soured on this equipment supplier, but 98% of the 1,216 CAPS members rating Manitowoc are bullish despite the drop in shares.
MEMC
While continuing to rapidly expand to keep up with demand for its wafers, some setbacks in MEMC's manufacturing plants recently weakened sales and were blamed for the company's recent shortfall in earnings. But the company looks for a brighter second half of the year as strong orders continue from customers like LDK Solar (NYSE: LDK ) .
In the long run, high barriers to entry in its market for solar wafers have many investors bullish on the company. Some 96% of the 1,621 CAPS members rating MEMC see higher growth prospects than are currently priced into the stock, and have voted for the company to outperform the market.
Allegheny Technologies
Specialty metals producer Allegheny and peers like Titanium Metals (NYSE: TIE ) have been dragged lower with unfavorable macro metal trends lately. Allegheny's profits dropped 18% in the second quarter, and end-use markets such as automotive and aviation continue to concern investors.
But some contrarians point to a return on equity that is still above 30% and strength in other sectors such as aerospace and defense. Allegheny also continues to make significant capital investments, including a new joint venture facility in China coming online next year that will target demand from Asia. Even softness in metals hasn't deterred more than 95% of the 1,023 rating CAPS members who expect Allegheny Technologies to outperform the market.
Let 115,000 members be the judge
The collective wisdom of a huge pool of investors can help give context to a page of numbers developed through a stock screen. But even with an entire community of qualified opinions acting as the judge, individual investors are still the jury and should perform their own due diligence.
Run your favorite parameters through the Motley Fool CAPS screener. It's totally free, and even fun.
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