Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Wednesday's biggest winners among the stocks with top ratings of four or five stars.
Without further ado:
|
Company
|
Yesterday's % Gain
|
|
Satyam Computer (NYSE: SAY )
|
35.71%
|
|
Frontline
|
10.56%
|
|
Suntech Power (NYSE: STP )
|
8.33%
|
|
United States Steel
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6.11%
|
|
Rio Tinto (NYSE: RTP )
|
5.73%
|
There's a reason why I selected those notable gainers as opposed to other winners making noise on Wednesday, like low-rated Crocs. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?
Our community of more than 135,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.
Written in the (five) stars?
For example, 96% of the 1,107 members who've rated scandal-ridden Satyam have a bullish opinion of the stock. Last week, one of those Fools, PizzeriaMan, explained why the Indian outsourcing firm would recover from its troubles:
Stock is excessively beaten down due to the accounting scandal. Its target market is fundamentally sound, and Indian govt. will not let this company go under, for fear of scaring institutional and foreign investors
Consistent with that call, shares of Satyam soared more than 30% for the second straight day, after the company posted a surprise profit of $33.5 million for the quarter ended in December.
The bullish lesson?
Embrace the opportunities that distressed situations provide. As CAPS' PizzeriaMan understands, stigmatized stocks aren't always easy on the stomach, but if the company's fundamental picture remains intact, you might be staring at an authentic bargain. Like Warren Buffett says, "Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."
And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Wednesday's biggest decliners with one- or two-star ratings:
|
Company
|
Yesterday's % Loss
|
|
UAL (Nasdaq: UAUA )
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6.22%
|
|
Continental Airlines
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6.01%
|
|
Palm (Nasdaq: PALM )
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5.59%
|
|
Morgan Stanley (NYSE: MS )
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5.55%
|
|
PNC Financial (NYSE: PNC )
|
5.39%
|
While yesterday's drop in highly-rated Sina may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Last month, for instance, CAPS All-Star ww2004 predicted turbulent times for UAL:
The bigger airlines are toast over the next few years, if they last that long. Less people traveling and higher fuel costs combined with inability to reduce costs fast enough will see [UAL] underperforming and likely bankrupt within 5 years.
Not surprisingly, shares of the United Airlines parent are down 21% since call. In fact, yesterday's drop came after Fitch Ratings downgraded its debt deeper into junk status on "extreme" revenue pressures, while oil rose to over $71 a barrel.
The bearish takeaway?
Protect your portfolio from airsickness. Unless you're completely confident that a specific airline can indeed sustain superior returns on capital -- be it through differentiation or a low-cost structure -- the cutthroat nature of the industry makes it difficult to earn a decent long-term buck. In Warren Buffett's words, "You've got huge fixed costs, you've got strong labor unions, and you've got commodity pricing. That is not a great recipe for success."
The final Foolish move
Investors often focus strictly on stock price movements without realizing that developing a proper stock-picking process counts most.
Over at Motley Fool CAPS, thousands of investors are Foolishly sharing insightful investment tips to help, above all else, identify tomorrow's big movers. Over time, consistently reverse-engineering winning -- and losing -- stocks will help you become a more Foolish investor.
Log in to CAPS today and start participating. It's absolutely free -- and a lot of fun!
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