Successful investing requires you to think independently and stick to your convictions. That's difficult enough with stocks that are generally popular -- after all, in the stock market, there's a seller for every buyer. But it gets even tougher with stocks that can't seem to find good press or bullish investors anywhere. Of course, defying popular opinion has led many contrarian investors to great returns.
In that spirit, I headed to Motley Fool CAPS to dig up unloved stocks that delivered big gains to shareholders over the past month. Our community of investors has put these companies on the bottom two rungs of the CAPS rating scale:
|
Stock |
30-day Return |
One-year Return |
Current CAPS Rating |
|---|---|---|---|
|
Overstock.com |
61.4% |
5.4% |
* |
|
China
Finance Online |
32.7% |
177.9% |
* |
|
First Solar |
26.3% |
425.5% |
** |
|
Merrill Lynch |
22.3% |
(43.8%) |
** |
|
General Motors |
21.8% |
(23.4%) |
* |
|
Fortress Investment Group |
18.9% |
(46.1%) |
* |
|
Citigroup |
18.0% |
(51.2%) |
** |
Now, given CAPS' knack for accurately gauging winners and losers, at least for the first year we have collected data, I'm not recommending that you run out and buy these stocks! An index set up to short CAPS' least-liked stocks has outperformed nearly 98% of all other CAPS players. That said, CAPS players have proved overly negative on some high-performing stocks. Are any of the stocks above the same sort of undercover rockets?
Providing the pep
The fears surrounding Merrill Lynch are as much of a secret as Dennis Rodman's cross-dressing. The billions upon billions that Merrill has written off due to its poor risk management over the past few years, along with the expectation that more could be on the way, have many investors keeping their distance. In fact, in some investors' eyes, Lady Dennis might have a beauty edge on Merrill these days.
But if the well-known risks have been hammering its stock down, any sense that the worst is over can provide a nice boost. The market's volatility has simmered down a good deal in recent weeks, and investors have been getting more confident that the sins of many financials like Merrill and Citigroup have been purged. As a result, the stock prices among the investment banks and brokerages have been unusually buoyant.
Combing CAPS
Merrill certainly is not a favorite on CAPS, but there are more than 800 players who think the stock will be an outperformer. One of CAPS' top players, TMFBreakerJava, gave Merrill the nod back in mid-March and has picked up more than 20 points on the stock since then. He reasoned:
I think that the fear is at a peak now on Wall Street and that the failure of Bear Stearns is providing us with bargains in the other investment banks and brokers. Merrill Lynch is one of the titans of the industry and will be operating profitably when the subprime crisis is a fading memory.
Prescient words with Merrill -- many of its banking peers are up strongly today.
So what's your take? Is there good reason to get more bullish on Merrill right now? Or are its sunnier days numbered? Head to CAPS and let the community of more than 100,000 Fools know what you think. While you're there you can start your research on any other stocks listed above or any of the 5,600-plus stocks on CAPS.
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