5 Stocks That Laugh at Wall Street

In these heady economic times, Mr. Market seems to enjoy dogpiling on any stock that dares to fall short of analysts' estimates. To defy that trend, we're here to celebrate stocks that didn't merely meet Wall Street's predictions, but laughed in analysts' faces by leaving their miserly forecasts in the dust. The companies below have all soundly trounced earnings estimates by 20% or more in the last quarter:

Source: Yahoo.com; NC=not calculable; Alvarion earned $0.01 vs. $0.00 estimated.

Nonetheless, beating estimates isn't enough to make a stock a winner. Analysts are notoriously lousy at forecasting results, and one-time items can sometimes push earnings over the top. Wall Street professionals typically don't include such extraordinary events in their forecasts.

Rather than focusing only on the past, we'll check whether analysts have a bead on future performance. With help from Motley Fool CAPS, we'll see which of the top companies listed above will have the last laugh.

The joke's on us
Is it hype or hope? Oil and gas exploration company InterOil has been defying expectations for awhile now, reporting it hit the top of its Papua New Guinea reservoir at a level higher than anticipated, which caused the company to increase its estimates of just how large the pocket is. Then in December, it said a gas well pumped a record amount of fuel. It's looking to build a $5 billion to $7 billion LNG export facility to ship gas from Papua New Guinea to Japan and South Korea.

The stock is up more than 250% over the past year, trading at around $67 a share, but it's been higher having topped out at more than $84 a stub in January. Yet with over three million shares sold short (7% of the total shares outstanding), there's a large slug of investors believing InterOil is set for a further fall still.

Speaking of selling short, the Fraud Discovery Institute -- an organization formed by convicted stock fraud operator Barry Minkow that has targeted for short-selling a diverse group of companies from Lennar (NYSE:LEN) to PrePaid Legal based on what it alleges are misleading claims by the companies -- charges that InterOil may be leading investors down a garden path to failure. He points out that there's nothing proven in the exploration company's reserves and it is relying upon press release hype to boost share prices.

Such companies tend to generate lots of conflicting passions among investors and InterOil is no exception: 42% of CAPS members rating the company believe it will outperform the market while 58% say it won't. Among All-Star members the schism is even wider, with three quarters believing it will underperform the broad market averages.

You end up getting divergent opinions, like those expressed by WombRaider who finds its expectations too optimistic and TMFBreakerJava who thinks the opportunity is great for the Papua New Guinea area to become a major industry player -- although he acknowledges the voices of concern.

This company is sitting on an enormous natural gas find in Papua New Guinea. There is a chance that oil will be found as well. This week they got approval to build an LNG plant. Papua New Guinea is emerging as an important energy supplier thanks to the properties this company is in the process of exploring. I have to note that there are some voices out there claiming the whole thing is a scam, but I am convinced that this is the real thing. Jump on and enjoy the ride.

Add your view of E&P player's potential on the InterOil CAPS page, because if what the company says turns out to be true it could be huge. For example, Interoil had reported pumping the equivalent of 382 million cubic feet a day at its Antelope I well, but surpassed that at Antelope II by pumping 705 million cubic feet per day. In comparison, XTO Energy  (NYSE:XTO) reported initial production rates of nine wells in the core Barnett area ranging from just 4.1 million cubic feet equivalent per day to 5.5 million cubic feet equivalent per day.

Of course, some think companies and analysts should be more circumspect in reporting rates and reserves, because there seems to be little correlation between initial production rates and ultimately recoverable reserves.

Yucking it up
The market's rally has changed from being mostly fueled by low-quality stocks to dragging most others along based on lower year over year comparables. If you think there's some funny business afoot, let us know -- head over to Motley Fool CAPS and sound off.