We know that insider buying, stock buybacks, and raising guidance are considered bullish signs. But what about the opposite?

Insider selling isn't always a sign of rough waters ahead -- they might need the money for Junior's education, or for reasons that have nothing to do with the business. And while stock dilution can be a bad thing, splitting a stock to make more shares available can be good.

Don't look down
What about lowering guidance? It could be a warning of poor performance for the foreseeable future, or it could be a small speed bump on the road to further profits. When a company forecasts lower profits or revenues, its stock usually takes a hit. Maybe it's time to get out, too -- or maybe it's time to buy more!

To help tell the difference, we're going to turn to the Motley Fool CAPS community to learn which of these stocks Foolish investors think have the power to turn lemons into lemonade.


Forecast Period

New Guidance

Analyst Forecast

CAPS Rating


Q1 2007




Seagate Technology (NYSE:STX)

Q3 2007

$2.8 billion*

$2.94 billion*



Q2 2007

$2.6 billion*

$2.69 billion*


American Home Mortgage (NYSE:AHM)

FY 2007




Daktronics (NASDAQ:DAKT)

Q4 2006




Source: Company SEC filings; Yahoo! Finance. CAPS Ratings courtesy of Motley Fool CAPS.
*Denotes revenue estimates

This current crop of guidance-lowering stocks isn't viewed very highly by CAPS players. Unlike last week where there was at least one company with a favorable outlook, the CAPS community has a pretty sour puss on right now. The system currently asks more than 25,000 professional and novice investors alike to rank the thousands of stocks in our CAPS universe, overweighting the opinions of the most successful and accurate among them. From that data, CAPS rates each company from one to five stars, with five stars being the best.

Star of the lemonade stand?
There doesn't seem to be any one stock that has the power to make investors pucker up. We can perhaps understand American Home Mortgage's low standing, considering the state of the housing industry and mortgage lending, but what might account for the two-star ratings at large electronic display-maker Daktronics or Western Digital (NYSE:WDC) rival Seagate?

Over at CAPS, investors have raised these concerns:

  • CAPS all-stars Lifeguru and Jeffreyw point to lower demand and lower prices as two particular points that account for a dour look at Daktronics. And top-rated Fool and CAPS player TMFBent says investors can expect "more pain from this one."
  • DrMarcoPolo thinks the bears have it all wrong on Daktronics. He says "they have a huge advantage with the billboard market due to their UNMATCHED expertise in the video led business (marketing, customer base, list of safisfied customers, IT support, software integration, etc.)."
  • Another top-rated CAPS player, knudfool, sees flash memory as making inroads into Seagate's hard drive business: "Over the next 5 years hard drives will be dropping from notebooks. (Flash memory) uses less power (more battery life) and are more stable. Who here has had a flash drive go thru the wash and still work! Hard to beat that."
  • However, a few investors think the threat from flash memory is overblown. u4aora says Seagate is "undervalued due to misinformation on flash and market growth" while tbolioli concurs, saying "digital content needs to be stored. External HDD are easier and more reliable than DVDs, etc. Increased demand should prop this one up and keep it modestly outperforming."

So are the Bulls right? Will the Bear arguments win out? Want to tell us what your opinion is on these companies? Then click here to join the Fool's groundbreaking achievement in collective investor intelligence. It's completely free to join.

Make 7 picks on CAPS by April 24 and we'll send you a free copy of The Motley Fool Five-Star Report. Inside you'll discover how to use CAPS as a research tool, and you will receive a recommended five-star CAPS pick poised to beat the market for the next decade or more -- one that you can easily translate into profits for your real-world portfolio. But please hurry. This special report will be mailed out on Tuesday, April 24. And it's only being sent to CAPS members who have their seven picks in. Click here to get started now!

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.