"If I have seen further than others, it is by standing on the shoulders of giants."
-- Sir Isaac Newton
There's a reason that more than 30,000 investors flock to Omaha, Neb., every May, and why millions more rummage through the Berkshire Hathaway annual reports. Gleaning knowledge from proven investors is one way to find the stocks that will make you rich.
Using Motley Fool CAPS, the Fool's 130,000-plus-member investing community, we can see which stocks got a boost in attention from proven investors in the past month.
In addition to a stock's CAPS star rating, a sudden increase in bullish interest from CAPS members ranked in the top 20% of the community -- we call them CAPS All-Stars -- is a very good sign, one you should take note of. One striking example is genetic-research equipment maker Sequenom (SQNM), which is up some 31% since its bullish interest doubled the first week of June. The S&P 500 is down 39% over the same period.
Conversely, a sudden increase in bearish interest from CAPS All-Stars might be an early signal that the stock's one to avoid.
A bullish stampede
To illustrate, here are five stocks receiving more support from CAPS All-Stars over the past four weeks:
|
Company
|
Industry
|
% Change in All-Star Bulls From 2/16 to 3/16
|
CAPS Rating (Out of 5)
|
|
Ctrip.com (CTRP)
|
Travel Services
|
16%
|
****
|
|
VMware (NYSE: VMW )
|
Software
|
17%
|
****
|
|
iShares FTSE/Xinhua China 25 ETF (NYSE: FXI )
|
ETF
|
19%
|
****
|
|
Bucyrus International (BUCY)
|
Mining Equipment
|
15%
|
*****
|
|
China Security & Surveillance (CSR)
|
Security Services
|
25%
|
*****
|
Data from Motley Fool CAPS as of March 16, 2009.
If this data's any indication, top investors are beginning to find some good values from across the Pacific in the wake of the great Chinese market crash of 2007-2008. Indeed, the Chinese markets have rebounded so far this year, up 20% while our own S&P 500 is down 10%.
Many mining and tech stocks were also punished severely in the recent downturn, and Bucyrus and VMware were no exceptions. Both stocks fell more than 75% from their 52-week highs. Now it appears that All-Stars believe a change in fortune is around the corner.
With all these investments still well below their 52-week highs, and given the increase in All-Star approval, these four- and five-star investments present some great opportunities for further research.
When bears attack
Now that we've seen which stocks CAPS All-Stars think are poised to rebound, here are five stocks saddled with a greater number of "underperform" ratings over the past month:
|
Company
|
Sector
|
Change in All-Star Bears From 2/16 to 3/16
|
CAPS Rating
(Out of 5)
|
|
Visa (NYSE: V )
|
Financial Services
|
15%
|
***
|
|
Whole Foods (Nasdaq: WFMI )
|
Grocery Stores
|
28%
|
***
|
|
SPDR Gold Shares (NYSE: GLD )
|
ETF
|
51%
|
***
|
|
Wynn Resorts (Nasdaq: WYNN )
|
Resorts & Casinos
|
15%
|
**
|
|
Priceline.com (Nasdaq: PCLN )
|
Travel Services
|
96%
|
*
|
Data from Motley Fool CAPS as of March 16, 2009.
CAPS All-Stars remain skeptical about consumer-related companies. Mounting unemployment, reduced credit availability, and depressed asset values are taking their toll on American consumer spending, which accounts for nearly 70% of GDP. As people scale back their purchases, that means fewer transactions for Visa, fewer stops at pricey organic food stores, and fewer trips to Vegas casinos booked via online travel sites. Gold was a darling of the rattled market just a month ago, but All-Stars bears have been on the prowl looking to profit on the downside of the overhyped gold craze.
What to do next
Knowing when stocks are poised to change direction requires thorough fundamental analysis and a keen sense of changing conditions. Missing either of these key ingredients could lead you into a very bad investment, particularly if you short the stock.
At our new Motley Fool Pro service, which will be reopening for two days next week, we'll continue to stand on the shoulders of proven investors, using similar proprietary data points and our own thorough fundamental analysis to identify promising investment opportunities. Our ultimate goal is to help subscribers make money, whether the market is up, down, or flat, by going long and short using stocks, options, and ETFs. If you'd like to learn more about Motley Fool Pro, simply enter your email address in the box below.
This article was first published Oct. 2, 2008. It has been updated.
Todd Wenning is the lead analyst for Motley Fool Pro and a proud alumnus of St. Joseph's University. He does not own shares of any company mentioned. Ctrip.com International is a Motley Fool Hidden Gems recommendation. VMware is a Motley Fool Rule Breakers selection. Priceline.com, Berkshire, and Whole Foods Market are Motley Fool Stock Advisor picks. The Fool owns shares of Berkshire Hathaway, which is a Motley Fool Inside Value selection. The Fool's disclosure policy protects both longs and shorts.
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