Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest ones in the room. They've done their homework, and they're 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 also have investors 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 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 others 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
Back in the '80s, when the savings-and-loan crisis hurt the financial industry, fortunes were made on properties auctioned off by the Resolution Trust Corp. at below- market prices. Last year, there was a similar fire sale on failed banks when the Federal Deposit Insurance Corp. sold off their assets. US Bancorp was one of the beneficiaries. It completed eight acquisitions last year, gaining $18.4 billion in assets and $15.4 billion in deposits from nine failed banks owned by FBOP Corp.
Fifth Third Bancorp (Nasdaq: FITB ) , Zions Bancorporation (Nasdaq: ZION ) , and Regions Financial (NYSE: RF ) were all major acquirers as well.
Although US Bancorp's earnings for the latest quarter doubled from the year-ago period, write-offs for bad loans also doubled, though the company buying up all those distressed assets led to an increase in the number of loans written.
US Bancorp's conservative management and the fact that it is one of the country's healthiest banks despite the adversity sits well with the CAPS community, where 93% of the members rating it say it will outperform the broad market averages. All-Star member dswinters writes:
Tried and true savings and loan bank that does not take much risk. Besides Wells Fargo, this bank is one of the safest plays without the investment piece. Great dividend and cash flow. With the increasing changes from the Obama Admin earnings will continue to see pressure, but the free cash flow will keep paying the dividend. Slow growth and dividend will still out perform the market … and like this company seeing a price target near 50 in the next few years.
Head over to the US Bancorp CAPS page to offer your opinion on the company.
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, 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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