Surprises are part of the game when it comes to picking stocks. Sometimes this can mean bad news, like one of your top stocks revealing that its investment holdings are chock-full of bonds backed by failing subprime loans.
Other times, though, the market gets caught off guard by positive surprises from stocks that most investors thought were down for the count. In this situation, investors who stood by the stock often break out into a chorus of "I told you so," as short-sellers are forced to figure out just how much pain they can take.
To dig up some of these unloved stocks that have been defying naysayers, I'm turning once again to the Motley Fool CAPS community. Each of the companies below had been given a one-star rating (the lowest) by our community of investors just 30 days ago:
|
Stock |
30-Day Return |
One-Year Return |
Current CAPS Rating (out of 5) |
|---|---|---|---|
|
ParkerVision |
29.8% |
109.2% |
* |
|
UTStarcom |
29.6% |
(57.6%) |
* |
|
Fronteer Development Group |
27.2% |
105.6% |
** |
|
Open Text |
26.9% |
48.8% |
** |
|
Salesforce.com |
24.5% |
31.5% |
* |
|
General Motors |
24.1% |
22.6% |
* |
|
Affymax |
21.5% |
NA |
*** |
Now, I'm not recommending that you run out and buy these stocks! Their low ratings are a big, flashing red light. CAPS players have been pretty adept at picking out good stocks, and even better at pointing out bad stocks to avoid. In fact, an index set up to short the least-liked stocks in CAPS has outperformed nearly 97% of all other CAPS players.
In other words, most stocks that are rated with one star in CAPS are likely to underperform. However, CAPS players aren't perfect. They've been overly negative on stocks such as Crocs and DryShips, both of which have delivered seriously impressive returns to their investors.
So the question is whether any of the stocks in the table above might be one of those undercover rockets. To kick off your research, here are some of my thoughts on Affymax.
Revisiting Affymax
Though Affymax gained the least of the stocks on this list over the past month, it stands out from the group because CAPS players have boosted its rating from one lonely star to three. While a three-star rating (out of five) isn't superb, it certainly suggests that players have been giving the stock a second look.
Affymax describes itself as a biopharmaceutical company "focused on developing novel peptide-based drug candidates to improve the treatment of serious and often life-threatening conditions." Its leading drug candidate, Hematide, is a treatment for anemia -- the most common blood disorder.
Back in March, CAPS player NetscribeBiotech made favorable comments about the company, including mentioning that the potential market for Hematide is huge, but ultimately rated the stock an underperform on valuation concerns. Right now, that looks like a pretty prescient call, since the stock is down 18% since then, even with the recent run-up.
More recently, though, CAPS players -- including a number of All-Stars -- have turned positive on the stock, which has helped drive up its rating. Although the company hasn't announced much in the way of new developments, a late-August patent ruling against an anemia drug from Roche was seen by many as good news on the competitive front for Hematide, if and when it hits the market.
So is Affymax priced to win now? Or is it still a bit rich for the company's prospects? Head over to CAPS and let the community know what you think. While you're there, you can start your research on any of the other stocks listed above -- or any of the 5,000-plus stocks on CAPS.
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