Part of being a successful investor is being able to think independently and having a strong enough conviction to stick with your ideas. This can be a difficult enough task when you're looking at a stock that the media and analysts generally like -- after all, in the stock market, there's a seller for every buyer -- but it becomes a far thornier proposition when you're looking at a stock that can't seem to find good press or bullish investors anywhere.
Of course, going against popular opinion has also led to great returns for many contrarian investors.
In that spirit, I've headed to the Motley Fool CAPS community to dig up some unloved stocks that have delivered big gains to shareholders over the past month. Our community of investors had given each of these companies a one-star rating -- the lowest possible -- just 30 days ago:
|
Stock |
30-Day Return |
One-Year Return |
Current CAPS Rating (out of 5) |
|---|---|---|---|
|
Canadian Solar |
46% |
N/A |
* |
|
Uranerz Energy |
44.3% |
106.9% |
* |
|
Sulphco |
40.3% |
67% |
* |
|
Ionatron |
31.2% |
(7.6%) |
* |
|
Hovnanian Enterprises |
26.4% |
(60.2%) |
* |
|
Lazard |
25.6% |
16% |
** |
|
Travelzoo |
25% |
(30.1%) |
* |
Now, I'm not recommending that you run out and buy these stocks! Their low ratings are a big, flashing red light. CAPS players have been pretty adept at picking out good stocks, and even better at pointing out bad stocks to avoid. In fact, an index set up to short the least-liked stocks in CAPS has outperformed nearly 96% of all other CAPS players.
In other words, most stocks that are rated with one star in CAPS are likely to underperform. However, CAPS players aren't perfect. They've been overly negative on stocks such as Crocs and DryShips, both of which have delivered seriously impressive returns to their investors.
So the question is whether any of the stocks in that table might be one of those undercover rockets. To kick off your research, I'll offer some of my thoughts on Lazard.
Do research? You're kidding!
That's right, the best way to figure out whether any of these stocks is worth considering for your portfolio (real or CAPS) is to roll up those sleeves and dig in. What we're looking for here are stocks that have good fundamentals -- a profitable business, good management, and some decent growth prospects -- despite a lack of popularity. When CAPS players (including me!) were busy putting their thumbs down on Crocs, the management team behind the stock was busy building a profitable, growing business.
So with that said, I'd probably take a pass on Canadian Solar, simply because there are better solar companies out there -- such as Rule Breakers pick Suntech Power
But what about Lazard?
Lazard appears to have taken some of the pessimism from the rest of the financial services sector right on the chin. Lazard does face some of the same question marks that other investment banks do -- particularly whether corporate merger-and-acquisition volume in the U.S. and abroad can make up for the loss of the big private-equity deals that were taking place before the credit markets went kaput. The firm ducks out, though, when it comes to some of the bigger risks, such as loan write-offs from bad mortgages and loans for the private-equity deals.
Lazard has also been busy building its business lately, and though it isn't a terribly cheap stock at 23 times trailing earnings per share, it still has a lot of room for growth. The tide appears to be turning on CAPS, and Lazard has already been bumped to two stars from its former single star. CAPS All-Star yalenewb also commented back in early August that the stock is undervalued on the basis of expected earnings for next year.
So are CAPS players smart to start getting bullish on Lazard? Or is the low rating well earned? 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 stocks mentioned here, or any of the 5,000-plus stocks that have ratings on CAPS.
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