The Motley Fool's CAPS investing service is one of the newest additions to the investing community at Fool.com, and it's another great way for investors to work together to beat the market. One of the features in CAPS allows users to set up a blog to talk about their picks, investing strategy, market view, or what they just had for lunch (if they so desire). I've scoured through some of the most recent blog posts in the CAPS universe to bring you some of the great content that CAPS players are putting out.
American Home undervalued?
I don't know that I'd be going out on a limb if I said that housing and home lending are Public Enemy Number One in the equity markets right now -- subprime and Alt-A lenders in particular. Stocks like IndyMac
But is all lost for the entire industry? At least one CAPS-playing Fool, joewhite101, doesn't think so. He shares:
American Home Mortgage
(NYSE:AHM)has been beat up during the subprime fallout. The company is a mortgage lender, and they do issue subprime loans. However, the bulk of their lending occurs outside of the subprime arena. In 2006 American Home originated 112 non-prime loans out of 259,071 total originations.
One of the big questions though is about the Alt-A portion of their business. There were 25,267 Alt-A originations by American Home in '06. The lending market as a whole has assumed that it is just a matter of time before the Alt-A loans start to go bad, just as subprime has. This market assumption has led to fewer buyers for Alt-A commodities, and therefore the Alt-A bundles are fetching lower prices. Due to this market shift in purchasing mortgage commodities American Home lowered its full year guidance.
The shift in the market and the guidance revision doesn't indicate a problem with the company. Both conditions are a reflection of a short term market shift. The company will continue to pay a dividend through the rest of [the] year, though it won't compare to the $1.12 a share about to be paid. Once the dust settles on the subprime fallout, American Home will come out a winner in a market with fewer mortgage providers. The company has more than enough cash on hand to cover defaults on their subprime loans, and the ability to continue to originate loans of all varieties.
Finally, consider the fundamentals: PEG ratio of 1.1, price-to-sales of 0.98, price-to-book of 0.98, trailing P/E of 4.45, and forward P/E of 5.35. With those numbers the value is clear. American Home will emerge a big winner from the subprime mess, but it won't be this week or next week. It will be late this year or early next year.
For more of joewhite101's stylings, check out his blog here.
Squeezing money out of snake oil
Moving on to another volatile set of stocks, I come to CAPS All-Star ikkyu2 and his thoughts on some multi-level marketing (MLM) stocks:
I've got some pretty snarky underperform picks out there. Mannatech
(NASDAQ:MTEX), Medifast, and Herbalife (NYSE:HLF)come to mind. These are multi-level marketing schemes that co-opt the incomprehensible argot of science and the retail business model of Amway to create millions of dollars a year in sales. These companies are scams. They're selling hope, wrapped in jargon and peddled to you by your friends. But there's no science here, nothing to back up the inflated claims -- nothing but a placebo effect, a shrill home office issuing glossy pamphlets, and in the end a drawer full of overpriced junk and busted dreams.
"No one ever went broke underestimating the intelligence of the American public." True that! And honestly, in my heart of hearts, I'm probably more bullish on these companies than my picks would let on. You'd have to be a fool to buy these companies' products (not a Fool, just a fool) and, well, look around you. Have you met any fools lately? I know I have. Hope springs eternal in the human breast, and that may well translate to eternal profits for companies like these.
But I won't be riding the stock, whether it goes up or down. I've seen enough suffering, enough false hope, enough illness and obesity and busted dreams to last me a lifetime. I will not be trying to profit from these things. I don't think it's ethical, and I couldn't sleep at night if I owned a share in any of these companies. Your mileage may vary -- and that's what makes America great.
For more from ikkyu2, check out his blog here.
And to round out this roundup, we have a very timely post from CAPS newcomer hondo928. He shares his thoughts on Yahoo!
I owned Yahoo! stock until about a week ago -- buying at $27.50 and selling around the $32.20 mark. I meant to place an underperform on it in CAPS last week, but unfortunately I forgot. But seriously, I see no reason to own this stock until they fire all of its management. The stock was overvalued at $32 and is still overvalued with the stock price where it is now.
Management needs to get to the grindstone and start making things happen instead of continually missing earnings estimates. The company sucks -- period ... Well, the only way you're making money on Yahoo is by shorting it every time it is about to make an earnings report. My CAPS score and rating are getting massacred today, but it's still a good day because I don't own Yahoo! -- and neither should you.
It was a timely call to sell that Yahoo! stock, and hondo928 has certainly taken a strong stance against the company's management. Though this is his only blog posting so far, you can keep up with his future thoughts here.
Now it's your turn -- get off the sidelines, join CAPS, and start up your own CAPS blog to share your knowledge and insights with the rest of the CAPS universe.
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. Click here to get started now!
Fool contributor Matt Koppenheffer shares some thoughts of his own on his CAPS blog. He does not own shares of any of the companies mentioned. Yahoo! is a Motley Fool Stock Advisor pick. The Fool's disclosure policy does not have its own CAPS blog, but if it did, it would blow your mind.