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 has 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?
|
Company
|
CAPS Rating
(out of 5)
|
Wall Street Bearish Sentiment
|
| Country Style Cooking (NYSE: CCSC ) |
**** |
100% |
| Jinpan International (Nasdaq: JST ) |
**** |
100% |
| Sterlite Industries (NYSE: SLT ) |
***** |
75% |
Source: Motley Fool CAPS.
Now, as much as we love our CAPS community, you shouldn't buy these companies just because they've garnered top ratings. And don't sell '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.
Still huffing and puffing
I've always been told that the kind of Chinese food you get at your local takeout joint is nothing comparable to the food actually eaten in China. But maybe that's why Country Style Cooking missed estimates for three consecutive quarters: Perhaps selling Chinese fast-food in China is like trying to sell ice to the Inuit.
When I first heard about Country Style, I thought it was more of a domestic challenger to Cracker Barrel with its down-home comfort food. But I've since learned it's more akin to Yum! Brands (Nasdaq: YUM ) and McDonald's (NYSE: MCD ) , which have proven adept at maneuvering their menus in China.
Country Style's expansion plans present the biggest risk I can see. The company added 19 new restaurants in the last quarter, and it plans to open as many as 80 for the full year (slightly higher from previous guidance). Growth like that can sap the strength of a new company, particularly as it faces rising costs for labor, rent, and commodities. In fact, those were the largest contributing factors to its disappointing performance last quarter.
All-Star CAPS member jazzysav calls Country Style the "McDonald's of China," but you can tell us on the Country Style Cooking CAPS page whether you think it will be as successful as selling coals to Newcastle.
A rare breed
There's a lesson to be learned in the failure of solar panel maker Solyndra. The solar shop's operating model was unsustainable from the get-go, because it couldn't profitably make product as pricing for polysilicon fell. It was a bankruptcy waiting to happen.
Polysi manufacturers continue to increase capacity, driving prices down even more. Jinpan International, a maker of cast-resin transformers, found that some of its best business last quarter came from polysi makers building new plants. But demand just can't keep up with supply, and falling prices are likely to hurt a lot more solar companies in the future.
And like ABB (NYSE: ABB ) , wind power blew gusts of business this quarter, representing almost a quarter of net sales, most of them here in the U.S.
CAPS member MikeMark finds Jinpan falling as growth in China slows, but All-Star zwalt99 says that's not happening anytime soon: "It's undervalued, it's profitable, and China isn't going to use less electricity any time soon."
You can watch Jinpan International as it's buffeted by the winds of change by adding the transformer maker's stock to the Fool's free portfolio tracker.
A certain disconnect
Classic economics says that when demand exceeds supply, prices rise, but despite copper supplies running below demand, Indian copper miner Sterlite Industries recently cut prices. What gives? The global economy generally, and the U.S. economy in particular. Both are tottering on wobbly knees, and that's keeping pressure on lower pricing. Unemployment remains intransigent here, standing above 9% with no new net jobs created in the private sector. Year-to-date, even Freeport-McMoRan (NYSE: FCX ) share prices are down 30%.
Yet Freeport is facing labor unrest at an Indonesian copper mine, with the union set to strike for the second time in three months. Considering the Grasberg mine is the world's third-largest copper mine (and also possesses the largest reserves of gold), the disparity present in copper supplies could become even more severe. Whatever pressure might be tamping down increases, another strike could be the catalyst to send prices higher.
Almost 98% of the more than 1,100 CAPS members rating Sterlite see it being able to outperform the broad indexes. You can follow along by adding the copper and zinc miner to your watchlist and have all the news and analysis about its progress aggregated in a single location.
What's wrong with that?
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