Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest investors in the room. They've done their homework and are willing to bet their capital against the crowd -- an investing strategy that can be as lucrative as it is contrarian.
On Motley Fool CAPS, we've also got leading analysts who find the chinks in a company's armor and correctly call its fall. Our "Underdogs" have earned 100 or more CAPS points by 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. Instead of studying more of their pessimistic picks, we'll focus on the stocks these top members expect will outperform the market. If these CAPS investors have scored big by correctly predicting which stocks will fail, it may be worth our while to see which ones they think will succeed.
Not every short sale goes as planned, making shorting a risky proposition. 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 -- just the launching pad for further research.
Underdogs still wag their tails
The difference between most gold mining companies and Freeport-McMoRan, says CAPS member meandthekid, is that "Most minning stocks are speculative but not FCX It is a solid company that will rise to new highs !!!"
Spot gold prices jumped to $1,016 an ounce yesterday, an 18-month high, as Fed Chairman Ben Bernanke proclaimed all was right in the world and we're done with the recession. Even copper, despite higher inventory levels, rose on the belief that recovery is at hand. Other metals also surged higher, though the dollar slid against other major currencies.
The value of the dollar has xcrunner90 concerned, though, because inflation is on the minds of investors everywhere, even though the result will help Freeport:
The most recent recession has brought the issue of inflation to the ears of everyone. Investors are not the only ones concerned with inflation and value of the American dollar. Although the value of metals themselves may pull back from their present highs people will for a while be enamored with metals and the safety they provide.
Over the past six months copper stocks have done quite well for themselves as the worst of the recession's nightmares were put to bed. Southern Copper (NYSE: PCU ) is up 80% while Freeport has nearly doubled. Encore Wire (Nasdaq: WIRE ) , which makes copper wire and cable for residential and commercial construction projects, has even seen its shares soar despite the building industry's remaining weak.
Still wagging its tail
Just the other day, CAPS member hbrown906 said that Regions Financial is stronger than its critics give it credit for, suggesting it would work out the poorly performing loans in its portfolio. As if on cue, Regions crowed that it was adequately capitalized and didn't need another helping hand from the government. Indeed, it wants to get out from under the TARP loans it already has as soon as possible.
Ranking higher than 95% of all the other CAPS members, All-Star SeattleRoses concurs that Regions remains a more fundamentally sound institution than others that have won investor support:
The stock missed out the financial sector rally during the second quarter of 2009. RF's fundamentals are not as bad as other financial institutions whose stocks have outperform S&P500 during the past six month. It's just a matter of time... I sense that adjustment period is coming soon. RF will bounce back and outpace S&P500 and the rest of the financial sector.
There's no need to fear ...
Underdogs often shine brightest with their backs against the wall. Still, 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. 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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