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 |
Paramount Gold & Silver |
**** |
|
|
100.00 |
NII Holdings |
***** |
|
|
99.99 |
Neutral Tandem |
**** |
|
|
99.99 |
Tetra Tech |
**** |
|
|
99.51 |
Chimera Investment |
*** |
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
Investors have been anything but neutral in their opinion of network connection services provider Neutral Tandem, sending the stock on a downward spiral over the past six months that effectively cut its valuation in half. Although it affirmed its outlook for full-year revenues and said adjusted EBITDA will come in at the high end of estimates, analysts believe growing competition from Level 3 Communications
CAPS members aren't so easily shaken from their belief that the growth of wireless services will only be a long-term plus for Neutral Tandem. CAPS All-Star UltraLong sarcastically wonders what it would take for the market to realize the potential here:
Man do these guys absolutely suck! Do you believe the nerve of Neutral Tandem? How dare they amass $5.21 in net cash per share! Revenue growth....how dare they grow at 40-45% per annum over the last four years and nearly 19% in 2011. A trailing price to earnings of 13 and a forward P/e of 11? Blasphemy I say! Sticking to their guidance??? Why I never!!!!! Blatantly oversold condition. Where does the madness stop? Yeah these guys totally suck..... ? This is what we call a peanut butter and sarcasm sandwich
The CAPS community is indeed behind the connection services provider, as 96% of the more than 500 members rating it believe it will outperform the market. A similar percentage of All-Star members agree. Why not head over to the Neutral Tandem CAPS page and make the connection yourself?
Show me more
Even though Chimera Investment has only risen 3% in the two months since it was identified as a stock ready to run (compared to a flat S&P 500), the spinoff from Annaly Capital Management
It's a difficult time to be investing in residential mortgage-backed securities, and such vehicles represented 91% of Chimera's portfolio at the end of the last quarter. Importantly, though, it was able to dramatically reduce its leverage from 4.6:1 in the year-ago period to just 0.9:1 this last time out, meaning it's on a much firmer financial footing.
For highly rated CAPS All-Star member Ineedmoney101, Chimera represents a healthy dividend play. In late December, this member wrote:
Consistently handing out huge dividends because they are making more money than expected, as usual. Plenty of cash making more investments every quarter. This ex-dividend date sell-off is great because this is the day that i wanted to buy this stock anyways to keep for the future. But too bad this won't post til tomorrow when the price might not be the same.
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. While there, you can 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.
