Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest folks in the room. They've done their homework, and they're willing to bet their capital against the crowd -- an investing strategy that can be as lucrative as it is contrarian.
On Motley Fool CAPS, we've also got leading analysts who find the chinks in a company's armor and correctly call its fall. Our "Underdogs" have earned 100 or more CAPS points by correctly predicting that one or more stocks would underperform the market. However, we're going to focus on the stocks these top members expect will outperform the market. If these CAPS investors have scored big by correctly predicting which stocks will fail, it may be worth our while to see which others they think will succeed.
|geldej||95.91||Capstone Turbine (Nasdaq: CPST )||***|
|demeye||93.93||SodaStream (Nasdaq: SODA )||**|
Source: Motley Fool CAPS.
Not every short sale goes as planned, making shorting a risky proposition. Stock prices can be irrational longer than you have money to stay in the game. So don't use this as a list of stocks to sell or buy -- just the launching pad for further research.
Capping a new opportunity
The conga line of green tech failures is growing longer, but I don't expect Capstone Turbine to join them. Particularly since it's betting on oil and gas companies to become an important component of its growth plans.
Oil and gas drillers use its microturbines to power their rigs in remote areas, and its 1,000-kilowatt unit microturbines are well-suited for utility substations and larger commercial and industrial facilities. It recently sold its first such unit to an unnamed oil and gas producer, and just sold two more orders totaling approximately 10 megawatts in the Eagle Ford shale play. The turbines generate low-emission electricity onsite to power the plants' pumps and infrastructure systems instead of flaring the waste gas produced as a byproduct of the drilling process.
The natural gas industry is giving off conflicting signals these days. Many drillers, like Ultra Petroleum (NYSE: UPL ) and Qwiksilver Resources (NYSE: KWK ) , are cutting back on production, but vertical rig counts have started inching up again (horizontal rigs, which moved up last week, fell again) and inventories remain at record levels.
Capstone points to wins in the Eagle Ford and Marcellus regions, as well as those made in remote oilfields in Russia and Africa, as proof the energy sector will be its biggest growth driver. With 94% of those rating Capstone on CAPS expecting it to outperform the market averages, it seems they're looking for oil and gas companies to power its future, too.
A bubble ready to pop?
I see a mea culpa coming my way. I've castigated SodaStream International as no Green Mountain Coffee Roasters, despite its mimicking the coffee maker's business model of virtually giving away its soda units and making up the margins on the consumables. I've noted that (1) there are no patents protecting it like Green Mountain enjoyed, (2) third-party providers of carbonation and flavors can undercut its name-brand products, and (3) consumers aren't getting much of a discount making their soda at home compared to buying it. Slowing sales it reported last quarter would seem to underpin those concerns.
Yet I recently acquired an original SodaStream unit (for free!) and I have to admit I'm in danger of getting hooked on making my own soda. So far I've only bought syrup to replace the sample pack I started with, but it's fun popping a bottle in the unit and carbonating the water.
The biggest drawback I still see is the limited distribution of its products. While Bed Bath & Beyond and Macy's stock its products, it still requires a special trip to those stores. It's not like going to the supermarket to restock. So although I'm not ready to close out my winning underperform rating on SodaStream on CAPS just yet, that may change soon enough.
Highly rated CAPS All-Star member albaitis is betting on a short squeeze to drive shares higher in the short term. With more than 80% of the float sold short, that sounds like a distinct possibility. Add SodaStream to the Fool's free portfolio tracker and use the SodaStream International CAPS page to give us your thoughts on the whether shares will again bubble up.
There's no need to fear...
Underdogs often shine brightest with their backs against the wall. Still, it takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions. Start your own research on these stocks on Motley Fool CAPS where your opinion can still save the day. While there, you can 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.