Is Wall Street 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

Omnicell (Nasdaq: OMCL  )

****

50%

Pearson (NYSE: PSO  )

****

50%

RADVISION (Nasdaq: RVSN  )

****

50%

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 ratings. And don't go long 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.

Building a future
The key to Omnicell's future lies in its automated medication-dispensing technology and inventory-management systems. These products help hospitals and health-care providers improve accuracy and efficiency. However, analysts fear that IT spending constraints could impede Omincell's growth in the near future.

At one level, this argument makes sense, since medical device makers felt the pinch from cutbacks during the recession. However, health-care IT spending is expected to experience boom times very soon. Along with drug discovery and biotech, the market analysts at Frost & Sullivan place companies involved in IT at the vanguard of health-care spending growth. There will be an excess of demand for systems and applications that reduce medical errors and create a holistic view of a patient health data.

Omnicell has partnered with Cardinal Health (NYSE: CAH  ) , for example, to reduce the costs associated with its automated dispensing cabinets, while using other partnerships and acquisitions to strengthen the rest of its business.

Analysts seem to have taken a very myopic view here. CAPS member FitzColinGerald believes that OmniCell's industry will enjoy a resurgence in health-care spending:

Omnicell is a technology company that develops and sells medication dispensing systems. The company also offers software that facilitates communication between hospitals and pharmacies. Its earnings potential stands to benefit greatly from increased innovation in the sector.

Add the health-care IT leader to your watchlist, then head over to the Omnicell CAPS page and let us know whether you think it's a healthy opportunity.

Dead trees down
Perhaps best known as the publisher of the Financial Times and the Penguin books line, Pearson is really a publisher of educational materials, providing books and services to students and teachers globally. That puts it more in competition with McGraw-Hill (NYSE: MHP  ) than The Wall Street Journal. Besides, print publications are a dying breed, particularly with the ascendancy of alternative digital news sources.

KPMG Advisory Services calls education spending "an investment destination (that) is growing from the nascent stage to the growth stage." Pearson wants to capture a sizable portion of that opportunity. In emerging markets like India, it's looking for partnerships that will help it snare at least 10% market share over the next two years.

While CAPS member guridmaster likes Pearson's prospects, this investor wonders whether Amazon.com could change the publishing dynamics in some way. Meanwhile, CAPS member KenWatson1982 believes that online learning might have a bigger impact:

Pearson has begun working closely with schools to establish online learning platforms that will allow institutions to reach a much larger population. Arizona State University, for example, has predicted that their online learning curriculum and enrollment will triple in the next 5-7 years, putting Pearson in a good position to benefit as needs expand.

Let us know on the Pearson CAPS page whether online learning centers like Apollo Group (Nasdaq: APOL  ) have anything to worry about.

Going solo
Building up from a smaller base isn't an easy thing to do, but videoconferencing specialist RADVISION is learning to make do without its biggest customer, Cisco (Nasdaq: CSCO  ) .

Last year, the networking superstar bought RADVISION's biggest rival, Tandberg, causing a big hit to RADVISION's revenue. Cisco had made up more than one-third of RADVISION's revenue in 2010, but the loss of Cisco's contributions was larger than even management anticipated, overshadowing the growth that the company booked in other areas of its operations. Technology business revenue came in 21% higher than forecast, and if you took Cisco out of the equation, the company's visual business revenue jumped 59%.

RADVISION will eventually lap this year's grim comparisons, and be judged on its existing business lines. I've marked on CAPS for RADVISION to outperform over the next few years, to give it time to put some distance between it and the loss of Cisco.

Add RADVISION to the Fool's free portfolio tracker to have all our news and analysis about its progress aggregated in a single location.

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 has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Amazon.com and Cisco Systems. 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. The Motley Fool has a disclosure policy.

Fool contributor Rich Duprey owns shares of Cisco but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here.


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