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 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 recent calls some of 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 the launching pad for further research.
Underdogs still wag their tails
Even the carrion birds don't want to pick at General Growth Properties, which just filed for bankruptcy protection. The mall operator might normally provide a tasty morsel for other mall owners like Simon Property Group or Vornado Realty (NYSE: VNO), but the credit crunch makes a deal much more difficult.
Simon Property Group has defaulted on a mortgage payment for a mall it partly owns and operates in New York and is facing foreclosure on a South Florida mall after Wells Fargo (NYSE: WFC) filed suit against it. Dearth of capital led to General Growth Properties' filing, because it was unable to refinance its maturing debt agreements, and that lack of capital could lead to trouble for Simon Property Group.
Not that the parallels between Simon Property Group and General Growth Properties are so straightforward. The former was recently able to complete several mortgages on mall properties in Oklahoma and raised $1.2 billion in a debt-and-equity offering last month. Even so, it's not a given that it will have a chance to make a deal with General Growth Properties. Simon Property Group has some pretty serious issues, with a debt-to-equity ratio of almost six as a result of $18 billion in debt on its balance sheet.
That's why some investors won't go for Simon Property Group's stock. CAPS member wolfhounds thinks a turnaround is a ways off, so prospects for retail growth remain bleak.
The 17m share dilution and 10.35% ten year notes to stave off the inevitable won't overcome deteriorating conditions for mall operators. Unemployment will rise for some time, and recovery will be slow. High end sales from jewelry to fine wine is plummeting even now, well into the recession
There's no need to fear ...
When underdogs have their backs against the wall, 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. 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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