Great Call on Wachovia! What's Next?

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The bankruptcy of Lehman Brothers could have easily been the story of the year. But wait, there's also the government takeover of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). And let's not leave out good ol' AIG (NYSE: AIG). Lucky us. We've had all this -- and more! -- in the course of just a few weeks.

And we probably haven't seen the end of it. Earlier this week, Wachovia (NYSE: WB) found a way to join the fun. Sure, the bank may not have completely collapsed. But with the hasty sale of its retail, corporate, and investment bank (as well as its wealth-management division) to Citigroup (NYSE: C), and the stock price worth roughly 7% of its 52-week high, it's not surprising that some investors may not appreciate the distinction.

There's one thing I found most interesting about all of these implosions, though. Had you listened to the CAPS community, there's a good chance you would have been nowhere near these stocks when they did their supernova impression. All of them were rated either one or two stars (out of a possible five) when the bottom finally fell out.

Of course that doesn't mean that there's only been success from pessimism. In fact, TheSheet is the CAPS score leader for Wachovia, by virtue of  accomplished that by making two outperform calls on the stock right as pessimism was peaking. He's managed to rack up nearly 200 points from that one stock.

TheSheet is one of CAPS' All-Stars -- players with a rating of 80 or greater -- and he has managed a stock-picking accuracy of 72% on his call, while racking up nearly 1,000 points. Wachovia hasn't been his only great call. Here's a look at a few of his other prescient picks:

Company	Date Picked	Call	Points	CAPS Rating
AIG	9/16/08	Outperform	127	**
Lehman Brothers	3/17/08	Outperform	61	*
Hoku Scientific	11/21/07	Outperform	35	*

Data from CAPS.

So what is this investor looking at these days? Here are a few of his most recent calls on CAPS:

Company	Date Picked	Call	CAPS Rating
EnCana (NYSE: ECA)	9/29/08	Outperform	*****
Penn West Energy Trust	9/22/08	Outperform	*****
SPDR Gold Shares (NYSE: GLD)	9/17/08	Underperform	***

Data from CAPS.

While not all of these picks may pan out, they could be a good place to start some further research. I decided to take a closer look at EnCana.

The case of the disappearing fossil fuels
It shouldn't be too surprising that energy companies' stock prices have hit the skids lately. Since earlier this summer, we've seen the price of both oil and natural gas fall significantly from their highs. That's great news if you like driving a car or heating your home, but not so good if you're a company whose value is largely based on reserves of oil and natural gas.

As one of the world's largest oil and gas companies, EnCana's stock has certainly tasted some pain lately. After peaking at nearly $100 per share back in the summer, the stock has come back hard and fast; it's now down by more than a third. Yet the stock is still rated five stars on CAPS, with a 35-to-1 bull-to-bear ratio. What gives?

The bullish view on the company really lies in how you view the availability of oil and gas around the world. There are basically three camps, one that thinks more reserves will be found to replace used reserves and meet increasing demand, one that thinks we're running out of pretty much every fossil fuel, and one that prefers not to think about it at all, thank you very much. If you fall into the second camp -- as I do -- the logical expectation is that as we continue to work through the known global reserves the price of both oil and gas will continue to climb.

Among CAPS All-Stars, 184 of the 190 who've weighed in on EnCana are bullish on the stock. Mrsudbury, one of those All-Stars, gave the stock a thumbs-up back in January of last year and said:

One of the cheapest and well managed companies in Canadian Natural Gas. Americans are now addicted to this clean source of energy and must purchase it from Canada. Love it at this price, trading below 6 times earnings ... I see this company doubling in the next five years, no brainer!  

Since then the stock is up 41% and is not quite as cheap, but natural gas is still a U.S. addiction and it's still being piped down from Canada.

So what's your take on EnCana? Is there more downside ahead, or is it ready to rally along with oil and gas prices? Get in the action by clicking over to CAPS. CAPS is absolutely free and already has over 115,000 stock pickers chipping in to find the best stocks out there.

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On Oct. 7, 2008, Fool Co-Founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.