Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest guys in the room. They've done their homework, and they're willing to bet their capital against the crowd -- an investing strategy that can be as lucrative as it is contrarian.
On Motley Fool CAPS, we've also got leading analysts who find the chinks in a company's armor and correctly call its fall. Our "Underdogs" have earned 100 or more CAPS points by correctly predicting that one or more stocks would underperform the market.
Let's look at some of the recent calls these All-Star investors have made. Instead of studying more of their pessimistic picks, we'll focus on the stocks these top members expect will outperform the market. If these CAPS investors have scored big by correctly predicting which stocks will fail, it may be worth our while to see which others they think will succeed.
|
Underdog |
Company |
CAPS Rating
|
|
|---|---|---|---|
|
100.00 |
SIGA Technologies |
** |
|
|
100.00 |
Allied Irish Banks |
**** |
|
|
99.99 |
Synovus Financial |
*** |
|
|
99.99 |
Isis Pharmaceuticals |
**** |
|
|
99.99 |
Jinpan International |
***** |
Not every short sale goes as planned, making shorting a risky proposition. Stock prices can be irrational longer than you have money to stay in the game. So don't use this as a list of stocks to sell or buy -- just the launching pad for further research.
Underdogs still wag their tails
For a disease that's been almost non-existent for decades, smallpox has been in the news a lot lately, and investors have apparently been skittish over exactly what that means for SIGA Technologies, which is working to develop an antiviral drug to fight it.
Last week, the Obama administration announced it wants to crack down on production of biological weapons, including smallpox, but without the international monitoring of military and pharmaceutical research, because it could expose U.S. secrets to its enemies. That's the same position the Bush administration had when it walked out of negotiations shortly after the September 11 terrorist attacks. SIGA, Emergent BioSolutions
This relates to SIGA because its shares had been running higher in anticipation of an announcement by the U.S. Department of Health and Human Services on awarding a contract for an antiviral drug. Last Thursday, SIGA announced it sold more than 2.7 million shares at $7.35, a 15% discount to its closing price the previous day, causing its stock to fall. One day later, the department announced it was amending the Biomedical Advanced Research and Development Authority (BARDA) contract process, saying it now would offer one or more contracts. SIGA's stock plunged again, to below $5 a share, though it has since made up some of that lost ground.
Did SIGA have advance warning of changes to the contract that caused it to sell so many shares? It doesn't seem likely, though the timing is coincidental.
Yet SIGA still appears to have the inside track on gaining the BARDA contract -- or at least one of those awarded -- because, as the company notes, it has as much as a three-year lead on any other potential candidate in showing the efficacy of its drug in non-human primates, a key criteria for winning a contract. If you're a long-term investor in SIGA Technologies, the investment thesis remains intact.
CAPS member 9windsurfer is bullish on SIGA's potential, noting there's too much potential to list all its good qualities.
Too much positive to list for SIGA but they are gearing up for commercialization of the product have presented to BARDA and the World Health Organization. SIGA has also finalized the market image and packaging of the commercial material.
Similarly, lonewulf47638 writes that the sell-off in the shares is an excellent entry point for a company poised to capitalize on the threat this country faces.
Down on raising cash and will recover. Next bio terrorist threat will happen and stock will rise.
There's no need to fear ...
Underdogs often shine brightest with their backs against the wall. Still, it takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions. Start your own research on these stocks on Motley Fool CAPS, where your opinion can still save the day. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.
