Analysts Are Completely Wrong About These Stocks

Although there will always be differences of opinion, these are some of the CAPS community's most favored companies. So why does the professional analyst community look down on them?

Below we'll look closer at a handful of companies that CAPS members have bestowed the highest four- and five-star rating upon, meaning you think they have the best chance of outperforming the market. Yet Wall Street still can't muster up enough opinions to agree.

So who's got it right? The professional class of analysts, sitting in their paneled offices smoking stogies, or a motley crew of community investors pooling their best thoughts for others to share. We've got an idea on who we think will come out ahead, how about you?

Stock

CAPS Rating
(out of 5)

Wall Street Bullish Sentiment

Arthur J Gallagher & Co. (NYSE: AJG  )

****

33%

Bank of Ireland (NYSE: IRE  )

****

0%

Mechel (NYSE: MTL  )

****

50%

Source: Motley Fool CAPS.

Now as much as we love our CAPS community, don't invest in these companies just because they've garnered top honors. And don't sell just because Wall Street looks down on them either. Investing requires closer diligence on your part, so use these ratings as a launching pad for your own research.

A ray of hope
While the two analysts following CNinsure seem positively smitten by the Chinese insurance company despite its bipolar attitude to whether or not it actually needs cash for growth, insurance brokerage Arthur J. Gallagher & Co. has surprised analysts with its ability to generate profit and has gone on a shopping spree to bolster revenue.

Last quarter it surprised the market, posting profit from continuing operations of $0.44 a share and beating Wall Street expectations. It also snapped up a number of rivals, particularly in the benefits management area. Benefits Unlimited, Old Greenwich Consulting Group, GAB Robins North America, Behnke & Co., and Premier Risk Services have all been picked up by Gallagher over the past few months.

In contrast, the world's top insurance brokerage Aon (NYSE: AON  ) saw profit fall below estimates as brokerage margins declined. Aon's been shopping in the marketplace too, buying consultancy Hewitt Associates for $4.9 billion in July. The need to grow the top line has led second- and third-place brokers Marsh & McLennan and Willis Group to also pursue a growth-by-acquisition strategy.

More than three quarters of the CAPS members that rated the insurance broker believe it will outperform the broad market averages. You can ensure your thoughts on its prospects are also recorded on the Arthur J. Gallagher & Co. CAPS page.

Ride that pony
Europe's bailout of Ireland and its banks looks like it is having the intended effect of restoring confidence in the financial system. Both Bank of Ireland and Allied Irish Bank (NYSE: AIB  ) bounded higher after the Irish parliament preliminarily approved an austerity budget required as a condition of the bailout, but there are more votes to come.

And hurdles. Ireland's budget deficit is currently 32% of the country's GDP while Greece, which had everyone worrying about a default, has a deficit that's only 16% of GDP. Many CAPS members still cling to the notion that the government (both of Ireland and the EU) can't afford to allow the banking system in any of the endangered countries to fail and BRD2 thinks Bank of Ireland has already been given the means of its salvation.

The Bank of Ireland is fine, the EU has given the Bank of Ireland and [Allied Irish Banks] the tools to move on. If you think the Irish People are going to give up on their bank you may need to move on to another area of business. [Bank of Ireland] and [Allied Irish Banks] will be huge winners in the end. Continue to invest....

Only you can decide if it is right to deposit Bank of Ireland into your portfolio, so add it to your watchlist and have all the Foolish news and analysis aggregated for you in a single place.

Construct an argument for growth
With a bigger market cap than U.S. Steel (NYSE: X  ) and AK Steel (NYSE: AKS  ) combined, Russian mining and metals producer Mechel is expecting to add to its gains next year as the price of coking coal rises. First-half revenue surged 76% year over year on higher sales volumes as coal and steel demand came back to life. Coking coal is essential for the production of steel, and Mechel says coal prices could rise another 20% to 25% in 2011.

With more than 1,600 CAPS members weighing in on the Russian giant, the community is well ahead of Wall Street here with 96% looking for it to outperform the broad market averages. You can steel yourself for additional growth and let us know your views on the Mechel CAPS page.

What's wrong with that?
It pays to 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.

Sign up today for the completely free service, and tell us which side of the street will be the ultimate winner.

Marsh & McLennan is a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1393919, ~/Articles/ArticleHandler.aspx, 7/24/2014 11:53:12 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement