Momentum investors are stock players who get behind companies that have the wind in their sails. Contrarian investors typically pick up the cigar butts that the market has tossed aside. So what do you call investors who turn against winners? Sourpusses? Shorts?
Over on Motley Fool CAPS, we sometimes call them the savviest investors around. Not only does the 65,000-strong investor-intelligence community rate thousands of stocks every day, but the players themselves get rated, too. The best of the lot -- what CAPS calls All-Stars -- consistently outperform their peers over time and are assigned ratings of 80 or greater.
When an All-Star player sours on a top-rated stock, perhaps we should take notice. Maybe they've uncovered the chink in the highflier's armor. It could be they've found a question mark in the company's financial-statement footnotes. Or maybe it's just a hunch. That's why we say these tables are not lists of stocks to buy or sell, but rather starting points for further research. With about 10,000 stocks in the universe to choose from, this list can drastically whittle down that number. Read the pitches for or against a stock the investors write, and then dive into the financials.
Here's a list of stocks that our All-Stars have given the thumbs-down.
|
Company
|
CAPS Rating
|
1-Year Return
|
CAPS All-Star
|
Player Rating
|
|
Chipotle Mexican Grill (NYSE: CMG-B )
|
*****
|
114.6%
|
LurkyLurky
|
99.11
|
|
Level 3 Communications (Nasdaq: LVLT )
|
****
|
(4.6%)
|
jbwest
|
99.06
|
|
EMC (NYSE: EMC )
|
*****
|
68.6%
|
billator
|
99.23
|
|
Nuance Communications (Nasdaq: NUAN )
|
*****
|
131.7%
|
DownWithInfidels
|
98.92
|
|
GameStop (NYSE: GME )
|
*****
|
137.9%
|
numbnutz4
|
97.30
|
Over 9,600 investors have rated these stocks, with an average 96% of them being bullish on their prospects. Yet 97% of the All-Stars also think they'll outperform the market. What might have turned some of CAPS' top players against these otherwise widely admired companies?
A virtual lock?
Data storage specialist EMC has attracted a strong contingent of All-Stars who view the company's VMware subsidiary as its virtual ticket to higher levels. For example, STORMSTOCKER, with a 99.31 player rating, writes an exuberant note that the VMware spinoff will continue to contribute to the bottom line.
EARNINGS AND SALES SO FAR IN 2007 AND FROM 2006 ARE TRIPLE WHAT THEY WERE IN 2004. THAT IS PRETTY SOLID GROWTH/EARNINGS. AND WITH THE IPO SPINOFF OF ONE OF THEIR COMPANIES (THEY OWN 90% OF THE STOCK) [WHOSE] STOCK PRICE JUST SHOT UP 88% ON THE FIRST DAY SHOULD REALLY HELP THE BOTTOM LINE EVEN FURTHER.
Because of VMware, CAPS player DirtySmuggler still views EMC as a good value.
With VMWare taken out of Market cap, this becomes a 10B dollar company for EMC's base services.
Now consider EMC had a gross profit of 2.1B dollars while VMWare had a gross profit of only 580M. That would mean EMC's core business had a profit of 1.5B leaving EMC without VMWare sitting slightly above 6x earnings.
Can anyone say cheap?
Players like signal9, however, remain unconvinced. EMC might be a very good company, but he doesn't see how it's supposed to prosper going forward.
It would take a miracle to get this stock to move anywhere. Great bluechip, stability is nice, just not exciting. Recent purchase-Avamar-total dog. Good idea meets bad end in the EMC purchasing graveyard. This seemed like a ditch attempt to pull backup software Networker out of the fire-is old code, recent rewrite adds shine to rust. Limited functionality for disaster recovery, complex and expensive. Guess what, Avamar and Legato-former competing technologies, both require client and server installs doing the same tasks. How exactly is that supposed to work together?
Make lemonade from lemons
We've know both sides here, but Motley Fool CAPS is more than what some pros think, even if they're All-Stars. It's where we invite you to share your thoughts and insights and add your voice to the debate. Go ahead, have your say. We're eagerly waiting!
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