Successful investors think independently and have the conviction to stick with their ideas.
This is difficult enough when you're looking at a stock the media and analysts like -- after all, in the stock market, there's a seller for every buyer. But it's even thornier when you're considering a stock that can't 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 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) |
|---|---|---|---|
|
Neurochem (NASDAQ:NRMX) |
30.4% |
(79.6%) |
* |
|
Tenet Healthcare (NYSE:THC) |
14.3% |
(44.6%) |
* |
|
Telik (NASDAQ:TELK) |
12.7% |
(81.6%) |
* |
|
State Street (NYSE:STT) |
12.3% |
20.4% |
* |
|
Canadian Solar (NASDAQ:CSIQ) |
11.2% |
(24.2%)* |
* |
|
Nortel Networks (NYSE:NT) |
10.9% |
(13.3%) |
* |
|
Ballard Power Systems (NASDAQ:BLDP) |
9.8% |
(19.3%) |
* |
I am not recommending that you run out and buy these stocks! Their low ratings are a big, flashing red light. CAPS players have been adept at picking good stocks, and even better at pointing out stocks to avoid. In fact, an index set up to short the least-liked stocks in CAPS has outperformed nearly 99% 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: Could any of the stocks in that table be one of those undercover rockets?
Do research? You're kidding!
That's right. The way to figure out whether any of these stocks is worth your (real or CAPS) portfolio is to roll up those sleeves and dig in. What we're looking for are stocks that have good fundamentals despite the lack of popularity -- a profitable business, good management, and some decent growth prospects.
That said, although Nortel had a good quarter, I still have an "I'll believe it when I see it" attitude toward the perpetual underperformer. Tenet likewise rose on better-than-expected earnings, but that one is still a bit too over-levered for my taste. As for Neurochem, well, it's just recovering a part of the 43% it lost in one day back in August.
But I have to say I was surprised to see State Street labeled as a one-star stock. It appears that a number of top players, including TMFBent and current Top Fool SpecBear, went negative on State Street at the end of last summer on worries over potential losses from asset-backed commercial paper conduit exposure. A number of other CAPS players then followed these highly rated players and helped drag down the rating for the stock.
So does State Street deserve a single star? If the most recent quarter means anything, then probably not. The company saw strong earnings and good asset inflows, and it did not report any major writedowns from exposure to the off-balance-sheet junky instruments.
On CAPS, EPS100Momentum underscored this, saying, "Oh my, this one is going to be a nightmare for shorts. So many had bets [that State Street] would have had exposure to sub-prime."
What's your take on State Street? Head to CAPS and let the community of 73,000 Fools know what you think. While you're there, you can start researching any of the other stocks listed above -- or any of the 5,000-plus stocks on CAPS.
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