Short-sellers and hedge funds, though sometimes shadowy, are sometimes seen as the smartest investors 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 have our own brand of investors 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 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 the launching pad for further research.
Underdogs still wag their tails
Chinese wind-turbine manufacturer A-Power Energy Generation Systems has signed a series of contracts that are leading to higher profits. For the fourth quarter of 2008, A-Power's revenues nearly doubled to $81.4 million while it turned in a $10 million profit.
In March, it signed an agreement with General Electric (NYSE: GE) to get gearboxes for its wind turbines, but perhaps equally important, established a joint venture to manufacture the gearboxes in China. Despite the difficult economy, A-Power is expecting revenues and profits to grow incrementally to $290 million and $29 million this year, respectively. However, that's substantially below the $335 million analysts were expecting.
It won't only be turbines on the go at A-Power, but its distributed power generation systems as well. For example, it has contracts to build two micro-grid electricity-generation systems using biomass as the primary fuel. The two contracts are valued at more than $75 million.
Those diversified revenue streams have investors like CAPS member geolitjon thinking positively.
China wind, power distribution play with good growth, strong ties to provincial gov. and partnerships with a blue chip. Looks a bit overbought now, but there's good reason for that.
Wind power doesn't seem to attract as much attention as it did last year, when oil was $100 a barrel. Yet the world's biggest turbine maker, Denmark's Vestas, reiterated its full-year sales guidance even though it's closing one of its plants and laying off 1,900 employees because of a "lack of political initiatives" to support wind energy. Similarly, Siemens (NYSE: SI), the third-largest wind turbine maker, is looking to expand its production, possibly putting a manufacturing plant in the U.S. In short, A-Power Generation may still dominate turbine production in China.
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. Start your own research on these stocks on Motley Fool CAPS, where your opinion counts. 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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