As an investor, it doesn't pay to follow the crowd.
In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.
Why this crowd is different
Jumping into a stock because your rich neighbor did, because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.
If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.
In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.
That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (akin to a "buy" call) or underperform rating (akin to a "sell" call) in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.
The top 7 diversified services underperform calls
In our CAPS community, Visa is classified in the "diversified services" space. It rates four stars and has garnered the most outperform calls by our members. The stocks I'm about to list have the opposite reputation. I present to you the 7 one- and two-star diversified services stocks with the most CAPS community member underperform ratings (I used a minimum market capitalization of $100 million and required that each stock be listed on a major U.S. exchange). Remember, stocks are rated on a five-star scale by our CAPS community, so one- and two-star stocks are consensus underperforms.
|
Company Name
|
Market Capitalization (in millions)
|
52-Week Price Change
|
Price-to-Earnings (TTM)
|
CAPS Rating (out of 5)
|
Underperform Picks
|
|
Dollar Thrifty Automotive Group (NYSE: DTG )
|
$1,366
|
126%
|
11.9
|
*
|
333
|
|
H & R Block (NYSE: HRB )
|
$4,220
|
-23%
|
9.4
|
**
|
184
|
|
New Oriental Education (NYSE: EDU )
|
$3,854
|
43%
|
51.4
|
*
|
171
|
|
Avis Budget Group (NYSE: CAR )
|
$935
|
-9%
|
NM
|
*
|
157
|
|
OpenTable (Nasdaq: OPEN )
|
$1,194
|
86%
|
133.9
|
*
|
142
|
|
Apollo Group (Nasdaq: APOL )
|
$6,223
|
-37%
|
10.8
|
**
|
131
|
|
Move, Inc. (Nasdaq: MOVE )
|
$299
|
-35%
|
NM
|
*
|
87
|
Source: Motley Fool CAPS. NM = not meaningful.
Folks who have bet against Dollar Thrifty and OpenTable have lost big-time over the past year. Currently, they're at opposite ends of the P/E spectrum, but the CAPS community isn't impressed by either, rating them both just one star.
More CAPS members think Dollar Thrifty is an underperform than any other diversified services stock. Do you think it deserves this lack of love? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on any one of these hotly debated stocks.
If you want to see the list of top diversified services companies (including Visa), click here.
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