These are some of the CAPS community's most-favored companies. So why does the professional analyst community look down on them?
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 about which we think will come out ahead ... how about you?
(out of 5)
Wall Street Bearish Sentiment
|Accuray (Nasdaq: ARAY )
|General Moly (NYSE: GMO )
|Western Refining (NYSE: WNR )
Source: Motley Fool CAPS.
As much as we love our CAPS community, don't buy these companies just because they've garnered top ratings. And don't go short just because Wall Street says to. Investing requires closer diligence on your part, so use these ratings as a launching pad for your own research.
Building a future
Because its CyberKnife machine is so expensive, capital spending policies by hospitals play a large role in how successful Accuray becomes. During the recession, and as "Obamacare" was debated, such expenditures became limited, hurting the medical-device maker's results, as well as those of peers Intuitive Surgical (Nasdaq: ISRG ) and Varian Medical Systems (NYSE: VAR ) .
We've since seen a thaw in spending restrictions, but uncertainty over health-care reforms and where the economy is heading still weigh heavily on Accuray. It missed analyst expectations last quarter, and although backlog increased 18% from the year-ago period -- as 13 new CyberKnife systems were added -- it also had two orders canceled and one was hanging out there so long (2.5 years) that it dropped it from backlog altogether.
Don't look at Accuray's P/E to get a handle on whether it's a good buy. The company is only just becoming more profitable, so that will skew the valuation. Instead, look to its acquisition of Tomo Therapy, which will allow it to compete more effectively against Varian and Siemens in the radiation oncology market.
Though the stock has slipped and trades 25% below its 52-week highs, the CAPS community remains convinced that health-care reforms and capital spending issues can be surmounted. Of the 549 members rating the medical-device maker, 95% believe it will outperform the broad indexes.
Tell us on the Accuray CAPS page whether it will be able to slice through the fog of doubt.
A rare breed
I understand why the analyst community might be dead-set against General Moly. At the end of last year, it got caught up in the rare-earth-metals bubble that saw all kinds of speculative bidding occur on stocks with even the most tangential relationship to the metals that really aren't so rare. I even indicated on CAPS that I thought the General would slip behind the market's performance because investors clearly weren't doing their homework.
Instead, look at its prospects as a molybdenum miner, since it's got that in spades with its Mount Hope and Liberty mines in Nevada. Yet the different between General Moly and Thompson Creek Metals (NYSE: TC ) is that the latter is the world's largest moly miner while General Moly hasn't dug a shovelful of the mineral out of the Earth yet. There is large potential in its mines, but it's still a few years away from realizing the opportunity.
General Moly is seeing increased institutional ownership in its stock. I'm not sure it can beat the indexes yet, but CAPS member jasenj1 has an appropriately long-term mind-set: "Taking a risk that they will pull good quality stuff out of the ground in the next year or two. Plan to sit on this and watch the price bounce around for the next year or so."
How about you? Let us know on the General Moly CAPS page if you think it will be subject to another speculative bubble.
A certain refinement
Analysts are only just beginning to come around to the realization that Western Refining is not only undervalued, but poised for big growth, as well. It took the refiner's better-than-expected second-quarter results to push Wall Street to realize that the widening gap in the crude spread will lift Western further.
Last year, refiners like Western and Valero Energy (NYSE: VLO ) were idling facilities as conditions proved unfavorable. That helped them survive the downturn, but analysts missed the inflection point and Western's stock has more than quadrupled over the past 12 months, and has risen 90% since the start of the year.
More than 1,100 CAPS members have weighed in on Western Refining; 96% of them think it will beat the market. You can follow the refiner's moves by adding it to the Fool's free portfolio tracker to have all the news and analysis about its progress aggregated in a single location. Then head over to the Western Refining CAPS page and refine your thoughts on its progress.
What's wrong with that?
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