Contrarian Shopping List

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett

Of the Oracle of Omaha's many aphorisms, this one holds a special place in Foolish investors' hearts. When you're looking to bag a bargain, a panicked sell-off among jittery investors offers you a great chance to snap up stocks on the cheap.

In the short term, professional traders' pessimism can become a self-fulfilling prophecy. As desperate institutions lower their asking prices to get rid of a stock, buyers' bid prices fall in tandem and create the very price decline that both sides feared in the first place -- until the selling stops.

Until it does, savvy investors can get "greedy" and grab bargains -- assuming that they really are bargains -- from these fearful sellers. In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled a shopping list of potential contrarian picks, we'll check them against the collective intelligence of Motley Fool CAPS.

Today's contenders include:

Stock

Currently Fetching

CAPS Rating
(5 Max)

Suntech Power  (NYSE:STP)

$51.70

****

Yingli Green Energy  (NYSE:YGE)

$23.13

***

First Solar (NASDAQ:FSLR)

$171.28

**

SunPower  (NASDAQ:SPWR)

$73.29

**

Solarfun Power  (NASDAQ:SOLF)

$16.30

**

China Sunergy  (NASDAQ:CSUN)

$9.97

**

VeraSun Energy  (NYSE:VSE)

$9.73

*

Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Current pricing also from MSN Money on the same date. CAPS ratings from Motley Fool CAPS.

Hmm. Methinks there's a pattern in this week's list of market rejects. Every one of them is involved in alternative energy in one form or another -- mostly solar, but we have ethanol producer VeraSun in there, just for variety's sake.

All of these "green" stocks are turning red this month. Did recent declines in oil prices have anything to do with it? Whatever the cause, as I look at today's list, I can't help noticing that the single stock still getting high marks from investors despite the sell-off is Motley Fool Rule Breakers pick Suntech Power. Let's find out why as we examine ...

The bull case for Suntech Power
Confession time. Ordinarily in this space, I tend toward statistical snobbery and regale you with the pitches of CAPS' most experienced and highest-ranking All-Stars. But if it's expert advice on Suntech you're looking for, you can find it easily enough by taking a free trial of Rule Breakers.

Today, we're going to try something different, as I bring you the Foolish words of three CAPS newcomers -- Fools who haven't yet developed a rep on CAPS but who, like all of us, have the potential to become All-Stars. You'll find their observations from last month no less compelling than those from players who rank in the top quintile.

  • dpddelta introduces us to Suntech: "A [Chinese] company that is one of the largest in the world in the solar industry. They are the lowest cost producer, and one of the fastest growing companies in the industry, and their profits are growing as fast as their sales. They just moved up their target for reaching the one gigawatt annual production capacity from 2010 to 2008."
  • Alunap adds: "Management has been very canny, they have secured silicon at a good price into the future, continue innovation, and have a bright future. They are involved with the Olympic Stadium 2008, and China, as elsewhere, is going to put a lot into alternative energy."
  • wildeagain, a self-described "huge believer in solar energy for China," offers a big-picture perspective on Suntech: "The base is already built in and the desire is getting infinately stronger. Why? The coal is burning. The cities are turning black. Something has to be done. The Chinese skies tell you so. The answer: nuclear and solar. Nuclear longer term. Solar right now."

I must admit, I agree with all three of today's featured pitchers -- both on solar power in general and Suntech in particular. I mean, sure, the company's price-to-earnings ratio of 54 scares the living daylights out of me. (Pun intended.) But given that analysts expect the company to grow its profits north of 43% per year over the next half-decade, I hesitate to call this stock "overpriced."

There are plenty of stocks with similar multiples to earnings that aren't expected to grow half as quickly: Boston Scientific, Bear Stearns, Business Objects -- and that's just the Bs. I could go on.

Time to chime in
Long story short, Suntech is starting to look eminently buyable to me. But this column's not designed just to tell you what I think about the company, or even what our CAPS players are saying. We really want to know what you think about Suntech. If you have an opinion, we have a place to voice it.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.


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