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

Canon (NYSE: CAJ  )

****

50%

Infinera (Nasdaq: INFN  )

*****

60%

Sterlite Industries (NYSE: SLT  )

*****

75%

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. But 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
Where Toyota, Sony, and other Japanese manufacturers have had to shut down operations in the wake of the earthquake and tsunami, camera maker Canon was able to partially resume operations at one of its plants in Hirosaki though fab-tool manufacturing in other areas remains disrupted. Nikon is also feeling the aftershocks of the disaster.

Canon and Nikon own about 44% of the global lithographic equipment market, and the damage inflicted on their facilities will reverberate across the industry. Taiwan Semiconductor Manufacturing (Nasdaq: TSM  ) , for example, is a major customer of both, and if its supply is interrupted, that could ripple out to the rest of the tech industry. Texas Instruments has said its digital light processing chip facility -- chips used in embedded pico projectors -- will not resume normal operations until September.

CAPS member streeter123 thinks Canon is one of the stronger competitors in the space, but the uncertainty in Japan makes an investment here a contrarian play:

My attempt to pick one of the stronger brands out of Japan that I think will eventually come back. But, being that the potential extent of the damage to the nuclear plant still isn't known, and being that Japan wasn't doing so well to begin with, I'm not putting to much stock in this as a "contrarian play".

Let us know on the Canon CAPS page if, with the stock down 8% over the past month, this is a picture-perfect investment now.

Stimulating the network
The disappointing earnings report of optical networking equipment specialist Infinera that kicked off the new year for the sector and caused the stock to get crushed hasn't gotten any better. Since then, Oclaro and Finisar have both said the immediate future looked worse than what analysts had been expecting. JDS Uniphase (Nasdaq: JDSU  ) , on the other hand, was one bright spot offering guidance above forecasts, although its stock has been knocked down like the others all the same.

Why might Infinera still win out then? Its unique, cutting-edge technology -- the photonic integration technology -- can help telecoms alleviate many of the bandwidth limitations imposed by increased Internet traffic. As the mobile Internet  only grows in popularity, the telecoms are going to need innovative solutions to open up bottlenecks.

Infinera is not a speculative play, but a riskier one. Next-gen 100G will be released next year, but companies like Ciena (Nasdaq: CIEN  ) are putting out upgrades now, that customers such as Verizon are utilizing. Yet as mdriver78 points out, Infinera is winning designs on its own:

Recently, Infinera won a Digital Optical Network contract with the North Georgia Network Cooperative, a finalist in the Federally funded broadband stimulus program. They got $33 million to build a 260-mile regional fiber-optic ring with middle mile and last mile segments to serve 334,000 people in eight counties in rural North Georgia, just outside metro Atlanta. We could reasonably expect INFN to win a lot of these stimulus broadband equipment contracts, because their Digital Optical Network is flexible, fast and has low operating costs.

Add the optical networking specialist to the Fool's free portfolio tracker and keep an eye on whether Infinera will continue to grow.

Hit in the solar plexus
Copper is going to remain in short supply for sometime and analysts and industry insiders are looking for prices to have their best year since 1966. It's not like a new copper mine can be easily started. Ivanhoe Mines (Nasdaq: IVN  ) has taken more than a decade to get its China operations to the point where it can begin producing next year.

For smaller producers like Sterlite Industries, the economics point in its favor. With a new management team in place, it's looking to reap the rewards of what's about to come. That could be why, with more than 1,100 CAPS members rating the copper miner, more than 97% see it outperforming the broader indexes.

Add Sterlite to your watchlist then head over to the Sterlite CAPS page and let us know why you think it's going to win.

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.

The Fool owns shares of Bank of America and Wells Fargo. 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 (2) | Recommend This Article (4)

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 April 05, 2011, at 9:44 AM, rsr521 wrote:

    "The disappointing earnings report of optical networking equipment specialist Infinera that kicked off the new year for the sector and caused the stock to get crushed hasn't gotten any better. Since then, JDS Uniphase (Nasdaq: JDSU ) , Oclaro, and Finisar have all said the

    immediate future looked worse than what analysts had been expecting."

    When did jdsu announce that? I haven't seen that. Did you make it up?

  • Report this Comment On April 05, 2011, at 2:39 PM, ionthemarket wrote:

    I like Sterlite Industries, technically they look positive while copper continues not have much action. Copper may be shifting.

    Here is a chart on STL

    http://www.moneyshow.com/image.asp?imgSrc=DailyCharts/charts...

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1469499, ~/Articles/ArticleHandler.aspx, 10/22/2014 11:23:41 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