Analysts Are Completely Wrong About These Stocks

Although there will always be differences of opinion, these are some of the CAPS community's most favored companies. So why does the professional analyst community look down on them?

Below we'll look closer at a handful of companies that CAPS members have bestowed the highest four- and five-star ratings upon, meaning you think they have the best chance of outperforming the market. Yet Wall Street still can't muster up enough opinions to agree.

So who's got it right? The professional class of analysts, sitting in their paneled offices smoking stogies, or a motley crew of community investors pooling their best thoughts for others to share? We've got an idea on who we think will come out ahead; how about you?

Source: Motley Fool CAPS.

Now as much as we love our CAPS community, don't invest in these companies just because they've garnered top honors. And don't sell just because Wall Street looks down on them either. Investing requires closer diligence on your part, so use these ratings as a launching pad for your own research.

A ray of hope
Proving that the freeze on spending is thawing, Accuray reported sales last quarter showing a 5% rise. This is important because as the manufacturer of the CyberKnife, a non-invasive surgical assistance tool, Accuray suffered when hospitals tightened up on making big, expensive purchases. That belt-tightening was also felt by Intuitive Surgical (Nasdaq: ISRG), the maker of daVinci surgical robots, and Varian Medical Systems, which makes giant cyclotrons for smashing cancer cells to bits, along with more traditional oncology treatments.

All three, though, have found sales rising in recent months, suggesting hospitals are going to want to install even more of these unique devices going forward. While CAPS member thechumley thinks Accuray's promotional nature may work against it, sallyparkinson thinks it will win because of its innovations:

[Accuray] is a very innovative company and it is in a class by itself!!!The very fact that it is being very [smart] and applying its technology in different directions show how clever it is.

Analysts are similarly split. Zacks, for example, also finds the CyberKnife a technological marvel, but with management having issued conservative guidance for 2011, the stock analyst thinks actual sales will be pressured. What about you? Let us know on the Accuray CAPS page whether it will be able to cut through the fog and deliver growth.

Canary in a coal mine
It's not so much sales that has analysts concerned about Patriot Coal, but rather the regulatory environment it's operating in. After the Massey Energy (NYSE: MEE) mine explosion earlier this year, the government's regulatory process slowed to a crawl. Not only were Patriot's margins hurt, but those of Consol Energy and Cliffs Natural Resources (NYSE: CLF) were affected as well.

Yet analysts remain giddy over Consol, but not Patriot, as the latter has suffered setbacks at several mining operations. Its Federal mine was idled for two weeks for installation of new ventilation equipment ordered by regulators, and the Federal and Panther mines had equipment issues. Goldman Sachs didn't like the reduced volumes the company expected while Brean Murray thinks the prices Patriot will get for its metallurgical coal will come under pressure.

The company maintains that those are now rearview issues, and with its new Black Oak mine coming online, Patriot is optimistic about 2011 -- even pricing should be stronger next year. With more than 95% of the 800 or so members who've weighed in on Patriot marking it to outperform, there's no doubt that more than a few feel as sid1138 does that it will simply be "cheap coal" that leaves its mark:

Oil is heading higher. The rest of the world (if not the US) is recovering, which will continue Oil's increase. The dollar will drop. All of this means energy prices will go higher. Right now, the cheapest form of energy is coal (with natural gas a close second), so demand for coal will increase. [Patriot] should benefit from that increase.

A nice patina
Although it's primarily thought of as a copper miner, Sterlite Industries also has a very large zinc business and operates coal-fired power plant in India, too. CAPS members such as highly rated All-Star Jeffreyw eye rising commodities prices and see Sterlite benefitting from investors hedging against the inflation that Fed chairman Ben Bernanke wants to precipitate.

Analysts at Goldman Sachs certainly like the copper space, as the investment banker upgraded Freeport-McMoRan (NYSE: FCX) to a buy from neutral. The factors they point to ought to bode well for Sterlite, too, including the potential for a copper shortage in the first half of 2011.

More than 1,000 CAPS members have indicated their preference for Sterlite, but only you can decide whether it's right for your portfolio. You can put the copper miner into Fool.com's free portfolio tracker, My Watchlist, and deposit your opinion on the Sterlite Industries CAPS page too.

Close
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