Wall Street's Wrong About These Stocks

Wall Street hates the companies listed below. So why do our Motley Fool CAPS members disagree? They've bestowed on these companies the highest four- and five-star ratings, signaling their faith that the associated businesses 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 Bearish Sentiment

Rubicon Minerals (NYSE: RBY  ) ***** 100%
USEC (NYSE: USU  ) **** 100%
W&T Offshore (NYSE: WTI  ) **** 67%

Source: Motley Fool CAPS.

Now as much as we love our CAPS community, don't buy these companies just because they've garnered the highest opinions. And don't sell 'em short 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
Short-sellers scored a minor victory when shares of Rubicon Minerals plummeted after it said it would be filing an amended report concerning inferred resources at its Phoenix gold project. The original report had suggested somewhere around 4 million ounces of gold could be inferred at the site, a godly amount considering the rich veins Goldcorp (NYSE: GG  ) has discovered there.

Here we are, nearly a month since the prospect of a revision was made public, and Rubicon's share price is down another 18%. While the uncertainty is likely weighing on the share price, the company remains confident the restatement will be more technical in nature than substantive. When you compare Rubicon's polygonal resource calculation to the block model calculation -- two modeling methodologies used to calculate the inferred resources available -- it's easy to come away with the notion that any revision downward will be limited.

While it's possible a downgrade would cause its stock to slide further, considering the greater potential for rich rewards out of Phoenix will outweigh those concerns, weakness should be thought of as a buying opportunity. Agnico-Eagle Mines (NYSE: AEM  ) may have Canada's largest gold mine, but Rubicon could have the largest upside potential.

With 98% of the CAPS members who rated the stock looking for Rubicon to outperform the market, it's easy to see they remain unconcerned by the setback that may come. Let us know on the Rubicon Minerals CAPS page whether the stock is ready to shine.

A no-win exchange
The prospects for the uranium and nuclear power industry -- as represented by uranium enrichment leader USEC and miner Cameco (NYSE: CCJ  ) -- were equally bright, until the devastating earthquake and subsequent tsunami that hit Japan over the weekend. With two explosions so far at Tokyo Electric Power's Fukushima nuclear power plant and the potential for a core meltdown at more than one reactor, a pall has been cast over the future of the industry.

Predictably, some U.S. politicians are already calling for a halt to nuclear power proliferation here, and Germany is planning to temporarily suspend the government's plan to extend the operating lives of the country's 17 nuclear power plants. The country will now be back on schedule to go nuclear-free in 2021.

Despite being a nuclear power proponent, I've gone and indicated my belief on CAPS that USEC will now underperform the broad market indexes, at least for the next year or so. Add the uranium enrichment specialist to the Fool's free portfolio tracker and keep an eye on whether USEC and the rest of the industry will survive the latest calamity.

Driving down the wrong road
Considering general animus against the oil industry and the slowdown in issuing drilling permits, there's little surprise independent oil and gas explorer W&T Offshore should have been hit so hard by a weak fourth-quarter earnings report. Most of its assets are in the Gulf of Mexico, where the government's no-drill ban is focused.

Of equal concern is that it is gearing up to be more of a natural-gas-facing business than one focused on oil. Natural gas prices remain in a funk, and putting 60% of your efforts into a sector that has giants like Chesapeake Energy (NYSE: CHK  ) looking to gain more oil exposure didn't help instill confidence.

While the short-term outlook is indeed grim, CAPS member Pelzie26 says W&T is a play on the long-term outlook for the overall energy industry: "Good short term play for rising oil prices and long term play for energy. High short interest only helps the cause."

Add the oil and gas explorer to your watchlist then head over to the W&T Offshore CAPS page and drill down for further insights on its future.

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.

W&T Offshore is a Motley Fool Hidden Gems pick. The Fool owns shares of Rubicon Minerals. Motley Fool Alpha owns shares of Chesapeake Energy. 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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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.

  • Report this Comment On March 22, 2011, at 9:17 AM, cheapybob wrote:

    Where does the "Wall Street Bearish Sentiment" number come from?

    Its very obvious there are a lot of bashers since Feb, but I would hope the sentiment number given has some basis in fact...

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