Momentum investors love to back companies with the wind in their sails. Contrarian investors typically pick up the cigar butts the market has tossed aside. So what do you call investors who turn against winners? Sourpusses? Shorts?
Over on Motley Fool CAPS, we sometimes call them the savviest investors around. When one of our All-Star players -- those whose stock-picking prowess places them in at least the 80th percentile of our community -- sours on a top-rated stock, perhaps we should take notice. Perhaps the player has found a chink in that highflier's armor, or a question mark in its financial footnotes. Or maybe it's just a hunch. That's why these tables aren't lists of stocks to buy or sell -- just starting points for further research.
Here's a list of stocks that some All-Stars have spurned recently:
|
Company |
Est. Long-term EPS Growth |
CAPS All-Star |
||
|---|---|---|---|---|
|
Psychiatric Solutions |
**** |
24% |
99.33 |
|
|
McDermott |
***** |
12% |
98.79 |
|
|
Hologic |
***** |
20% |
98.49 |
|
|
Sadia |
***** |
NA |
98.09 |
|
|
ENGlobal |
***** |
21% |
92.10 |
Source: Yahoo! Finance; Motley Fool CAPS.
Considering that on average, 97% of all investors rating these companies think they will outperform the market, what might have turned some of CAPS' top players against these otherwise widely admired companies?
The logic in health-care diagnostics
Women are major consumers of health-care services, for both their families and themselves. Not only do they face reproductive health issues, but they have longer life spans -- according to the Centers for Disease Control, women have a life expectancy of 80.7 years compared with 75.4 for men.
Diagnostic and medical imaging systems manufacturer Hologic specializes in the needs of women. Over the past few years, Hologic has made a series of acquisitions to offer more products that deal with breast cancer, osteoporosis, and most recently human papillomavirus, or HPV. The latest was as a result of its bid for Third Wave Technologies
CAPS investor Foehammer recognizes the market opportunity and believes Hologic's niche in it sets it apart from other players.
Although relatively small compared to other health care equipment suppliers, Hologic has been aggressive in finding their niche
by specializing in women's health needs primarily. Women's health care is big business as more and more women deal with the traditional stress factors that used to be mostly the man's problem. [There] are also the many health factors, which have always plagued women, but are now being more understood. Understanding means learning how to fight maladies and Hologic is there and ready to supply the weapons and ammunition to fight the battle.
Perhaps it's the dilutive nature of the Third Wave acquisition -- Hologic doesn't expect it to add to earnings until the HPV tests receive approval -- that causes some All-Star investors to bet against it.
The nuclear option
McDermott International is in energy services. Its construction and engineering expertise have led to growth in both the oil and gas industries, as well as nuclear power generation.
Although top-rated All-Star NJStockGuru found its shares a little expensive last month, the demand for its services, as seen in its backlog, indicates that this is a long-term winning investment.
MDR is a strong international infrastructure play with amazing earnings visibility. They have a 10 billion dollar backlog and demand for their services is high. However, it is a little expensive at this time by my standards, but should be a good pick upon any pullback.
Make lemonade from lemons
We've seen the direction some investors have indicated they believe these companies are heading, but Motley Fool CAPS is more than what the pros think, even if they're All-Stars. It's where we invite you to share your thoughts and insights and add your voice to the debate. Go ahead, have your say. We're eagerly waiting!
