Short-sellers and hedge funds, though sometimes shadowy, are sometimes seen as the smartest guys in the room. They did their homework and will bet their capital against the crowd. It's not the most popular way to go, but the rewards can be quite lucrative.
On Motley Fool CAPS, we've got our own brand of leading analysts who found the chinks in a company's armor and correctly called its fall. "Underdogs" are investors who earned 100 or more CAPS points correctly predicting that one or more stocks would underperform the market.
Let's look at some of the recent calls these All-Star investors have made. Yet, just as hedge fund operators don't always go short, we're going to look at recent Underdog picks no matter which way they've called them.
Not every short sale goes as planned, so it's a risky position to hold. Stock prices can be irrational longer than you have money to stay in the game. So don't use this as a list of stocks to sell or buy, but rather as a launching pad for further research.
Underdogs still wag their tails
One of the arguments made in favor of investing in gold miners like Goldcorp (NYSE: GG ) is that the price of the yellow metal has been buoyed by the government running its printing press non-stop, creating inflationary pressures underneath precious metals. Prices are up more than 4% since the start of the year and have risen more than 28% from their October lows. Some analysts even predict it will breach the $2000-an-ounce threshold!
Newmont Mining might be one of those gold bugs able to reap a windfall even if gold doesn't reach those lofty heights. It is forecasting an 81% surge in production this year from its Jakarta mine on the island of Sumbawa, where it owns a 45% interest in the facility. As a result of being able to mine higher-grade ore, Newmont expects gold production to increase to 486,000 ounces this year and estimates the mine has equity reserves of 4.2 million ounces. Overall, it expects 2009 gold sales of as much as 5.5 million ounces, which includes its increased stake in the Boddington gold-mine project in Australia.
It was higher gold prices that helped return Newmont to profitability in the fourth quarter, even as copper prices remained depressed and sales slumped. Net income was $10 million in the quarter compared to a loss of $289 million a year ago. Others, like Teck Cominco (NYSE: TCK ) , haven't been so fortunate, since their gold presence is minimal. The diversified mining and minerals company posted a fourth-quarter loss of $607 million as commodity prices swooned. Gold is its smallest segment, but it recorded an increase in revenues in 2008, while zinc and copper declined. Coal operations soared, and are by far its biggest segment, but it also increased its ownership stake in Teck Coal, which skews the results.
Although some investors, like CAPS member yes2jbs, see a correction coming in gold stocks before they resume their ascent, many think that better times are ahead for Newmont. Some 90% of those rating the gold producer see it outperforming the market, as do a like number of All-Star members. Even Wall Street analysts are positively bullish about its prospects. CAPS member evenstephen4 believes inflationary pressures coupled with currency devaluations will move this stock higher:
Gold is good. I think all gold stocks will appreciate from expanding debt, and the devaluations of most currencies in the world.
There's no need to fear ...
When underdogs have their backs against the wall, that's when they can shine their brightest, but it takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions. So start your own research on these stocks on Motley Fool CAPS, where your opinion can still save the day. While there, 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.
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