Is Wall Street Right About These Stocks?

Wall Street fawns over the companies listed below. So why do our Motley Fool CAPS members disagree? They've tarred these stocks with one- and two-star ratings, signaling their lack of faith that the associated companies will outperform the market.

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 think we know who'll come out ahead. How about you?

Stock

CAPS Rating
(out of 5)

Wall Street Bullish Sentiment

Green Mountain Coffee Roasters (Nasdaq: GMCR  )

*

80%

MSCI (Nasdaq: MSCI  )

**

100%

SPDR Gold Shares (NYSE: GLD  )

**

100%

Source: Motley Fool CAPS.

Now as much as we love our CAPS community, don't sell these companies short just because they've garnered the lowest opinions. And don't buy 'em just because Wall Street says to either. Investing requires closer diligence on your part, so use these ratings as a launching pad for your own research.

A heavy burden
When I vacation in Vermont each year, I drink copious amounts of coffee made by Green Mountain Coffee Roasters, but that doesn't stop me from siding with the bearish crowd. Even if it is a razor-and-blades business model, it never made sense to me the single-cup coffee maker could survive practically give away its machines but rapaciously charging for the pods. Boy, was I wrong. Even though it's off its most recent highs, shares still trade 43% higher than they did a year ago.

In a smart bit of marketing, Green Mountain may even be reeling in its former adversary Peet's Coffee by getting it to agree to sell coffee for its Keurig machines. The two had locked horns over Deidrich Coffee, but by joining together Peet's gets another platform from which to sell its beans and Green Mountain gets a much larger presence on the West coast where Peet's and Starbucks (Nasdaq: SBUX  ) dominate (OK, Starbucks is everywhere).

I've capitulated on Green Mountain and have closed out my thumbs down rating on the coffee maker. The all-too cogent arguments CAPS member ozzfan1317 makes have finally become too great to ignore.

Trailing metrics look expensive but when you look at forward metrics the valuation improves dramatically. Green Mountain trades at 33 times forward earnings while still growing at more than 50 percent. In the most recent quarter and even for this past year revenues grew at 67 percent while earnings grew at nearly a 70 percent rate. A price to earnings growth ratio below 1 usually gives you a stock that is noticeably cheap.

Let us know on the Green Mountain Coffee Roasters CAPS page whether the stock is day old cuppa joe just reheated or fresh brewed to grow even more.

A no-win exchange
Who knew stock exchanges themselves could be so wild and wooly? The London Stock Exchange is buying the Toronto Stock exchange. Deutsche Boerse is bidding on New York Stock Exchange operator NYSE Euronext (NYSE: NYX  ) . And everyone's expecting either Nasdaq OMX or CME Group (NYSE: CME  ) to make a bid for CBOE Holdings (Nasdaq: CBOE  ) .

Deutsche Bourse is casting its net even wider for the markets it wants to control introducing 1,200 new indexes to follow a variety of asset classes through its subsidiary Stoxx, directly challenging the market leading position currently held by MSCI, which has admitted previously it's been slow to enhance its own offerings.

Although Wall Street is confident MSCI will be able to outperform its own indexes and CAPS All-Stars are solidly behind the effort too, it may not be as simple a strategy as that. Yet with all the activity afoot in the industry, MSCI might not fly so low under the radar going forward. Add the index provider to the Fool's free portfolio tracker and keep an eye on whether MSCI's equity portfolio analytics brings sexy back.

Driving down the wrong road
I have to admit being a little surprised the SPDR Gold Shares trust is as low rated as it is considering the macro and global forces at play in the world. Tracking the price of bullion as it does, rising Mideast tensions, higher oil prices, and a heretofore recessionary economy should have turned most investors into gold bugs. Yet many are like CAPS member SwiperFox who recently opined that because everyone was rushing into gold, he felt contrarian that it was a sign the top had been reached: "Everybody's telling me that now is the time to buy gold. To me, that means sell. The time to buy gold was five years ago."

Add the gold trust to your watchlist then head over to the SPDR Gold Shares CAPS page and tell us whether a return to the gold standard and using gold and silver coins would remedy a long list of economic maladies.

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.

Peet's Coffee & Tea is a Motley Fool Big Short short-sale pick. Nasdaq OMX Group is a Motley Fool Inside Value selection. Green Mountain Coffee Roasters and NYSE Euronext are Motley Fool Rule Breakers picks. Starbucks is a Motley Fool Stock Advisor choice. Motley Fool Alpha has opened a short position on Green Mountain Coffee Roasters. Motley Fool Options has recommended a buy puts position on Green Mountain Coffee Roasters. The Fool owns shares of Nasdaq OMX Group and Starbucks. 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.


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