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 management has been backdating options.
Other times, though, the market gets caught off guard by positive surprises from stocks that most investors thought were down for the count. A chorus of "I told you so" from investors that stood by the stock often follows. Meanwhile, short-sellers are kicking themselves.
To dig up some of these unloved stocks that have been defying naysayers, I'm turning once again to The Motley Fool's 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 |
|---|---|---|---|
|
HomeBanc |
44.8% |
(59.0%) |
|
|
Raser Technologies |
40.8% |
(63.4%) |
|
|
Valhi |
37.1% |
133.2% |
|
|
Hoku Scientific |
32.8% |
6.7% |
|
|
Rentech |
32.2% |
(12.9%) |
|
|
Osiris Therapeutics |
30.2% |
NA |
|
|
Pep Boys |
28.9% |
38.2% |
It's important to remember that some of these stocks -- particularly the smaller, more volatile ones -- could just as easily reverse these big gains over the next 30 days. In some cases, though, the strength could be a sign that the prospects for the company have changed for the better, or that it had been beaten down just a little too far.
So the question with these stocks is: Are they better than CAPS players had thought, or are they are just singing that proverbial swan song? The best way to get a feel for where these guys are headed is to dig in and do some research. I thought I'd kick you off with some thoughts on one of these stocks: Raser Technologies.
The Raser's edge
I imagine some of the science and engineering behind Raser Technology's Symetron technology would blow my mind. The Symetron technology is designed to improve the efficiency and power density of electric motors and generators -- music to the ears of the green revolution's generals. The company is also working on geothermal systems that utilize wasted energy from existing power plants to produce additional electricity. Go green!
Raser's financials (more my language) are notably missing any trace of green, though this is par for the course when you're talking development companies. Revenue is negligible, and losses for the company are growing quickly. Interestingly, general and administrative costs, which totaled $15 million in 2006, grew faster in '06 than research and development, which were a much lower $4 million. Cash burn has been significant, and Raser has been supporting itself mostly through additional sales of stock.
As with a lot of similar companies, speculation plays a heavy hand in how the stock moves. Over the last month, two days of trading have provided the bulk of the 41% gain in the stock. On April 2, the company announced a $12.5 million private placement to help it continue its operations. The following day, the stock shot up 24.2%. Then yesterday, following the announcement that the company will hold a conference call to discuss unnamed "recent business developments," investors apparently had high hopes and pushed the stock up another 11%.
Despite the company's technological promise, CAPS players have been unimpressed. Some opinions are silly, like that of piemike, who says, "Warning: if you own this stock in real life, don't leave it at home unattended. It will rob your house, kidnap your kids, and shoot your dog." But some, like tsmfool's, are more serious:
Raser appears to have made some significant improvements in the older technology of motors, alternators, etc, but it still has not moved beyond government contracts and trials. The real money is if its technology is adapted by a major auto manufacturer. My concern is that its technology and patents will be outdated long before it is adopted. Other research into alternative energy sources may be more readily acceptable -- provided fuel costs remain elevated.
So do you agree with the investors who helped push Raser up more than 40% this month? Or do you think that the CAPS majority still has it right? 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 six stocks listed above -- or any of the 4,300-plus stocks on CAPS.
More CAPS Foolishness:
Make seven 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 emailed 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 Matt Koppenheffer didn't see these particular moves coming, but he's rarely surprised at Mr. Market's general tomfoolery. You can check out Matt's CAPS portfolio here, or visit his blog. He does not own shares of any of the companies mentioned. The Fool's disclosure policy taught Razor Ramon how to do the Razor's Edge.
