Wall Street's Wrong About These Stocks
These are some of the CAPS community's most-favored companies. So why does the professional analyst community look down on them?
Who has 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 have an idea on who we think will come out ahead. How about you?
CAPS Rating(out of 5)
Wall Street's Bearish Sentiment
|Clorox (NYS: CLX)|
|Stillwater Mining (NYS: SWC)|
|Turkcell (NYS: TKC)|
Source: Motley Fool CAPS.
Now, as much as we love our CAPS community, don't buy these companies just because they've garnered top ratings. And don't go short just because Wall Street says to, either. Investing requires closer diligence on your part, so use these ratings as a launching pad for your own research.
Still huffing and puffing
This is the Carl Icahn we know and fear. Long before he was given the loving appellation of "shareholder activist," Icahn was known as a corporate raider. He'd buy up a company, strip it of its best assets, and dump the remainder back on the market. More recently, he's been cast as a cuddly icon trying to shake up management at faltering companies Blockbuster and Take-Two Interactive, but his recent bid for Clorox seems to have him acting the wolf while donning sheep's clothes once again.
Icahn first offered $76.50 a share for the bleach maker, saying that Procter & Gamble (NYS: PG) or Colgate-Palmolive (NYS: CL) would be more than happy to bid up the stock to $100 a stub. But as the Fool's Rich Smith made clear, that analysis doesn't really hold up in the wash. More likely, he'd want to buy the company himself and then sell off some of its outlier business lines in favor of those that represent core brands. Admittedly, some brands, like Burt's Bees and STP, don't neatly dovetail with cleaning and kitchen products like Clorox, Glad, and Armor All, but there doesn't seem much financial justification for Icahn's efforts.
Management said thanks but no thanks to Icahn twice, rejecting an increased $80 bid and adopting a poison pill rights plan to thwart anyone grabbing more than 10% of the company. Normally, that's a tool to keep management entrenched; this time, it seems a worthy line of defense in keeping the wolf at bay.
With 95% of the CAPS members rating Clorox to outperform the broad market averages, it appears they had no truck with management's strategy for growth. But tell us on the Clorox CAPS page whether you think Icahn's offer is just a whitewash for some ulterior plan.
When gold doesn't shine
The market still hasn't forgiven Stillwater Mining for making an overpriced bid for Peregrine Metals.
Earlier this month, the platinum and palladium miner offered to buy the gold and copper miner's Argentinean assets for a huge premium. Junior miner Peregrine was trading for less than $1 a share on the Canadian exchanges, but Stillwater agreed to buy it for around $3.16 a share. Investors weren't buying the argument that it's the value of the copper Stillwater was bidding on.
Despite preliminary second-quarter results that were better than Wall Street forecasts, the stock is down 30% since the takeover bid was announced. In comparison, North American Palladium (ASE: PAL) trades 4% high in the same time frame, no doubt reflecting the better prospects of platinum.
CAPS member ibeckman says Stillwater's management has proved itself at running a successful operation, so he's willing to give the company the chance to prove itself with Peregrine. How about you? Let us know on the Stillwater Mining CAPS page whether you think this will be subject to another speculative bubble.
A certain disconnect
Even having little competition can be a headache sometimes. Turkey's largest cell-phone operator, Turkcell, owns 55% of the market there, but it suffered in the most recent quarter because its distributors abused the company's dominating position. As a result, it has to pay a fine to the country's Competition Board.
Other complications include a devaluation in Belarus, as well as Russian investors' acquisition of a large stake. There are many hands in Turkcell, and Altimo won a court battle with two Turkish companies over a 14% stake in the telecom. Swedish telecom TeliaSonera owns another 37% of the company. And to complicate matters further, the court-imposed fee reductions have given new life to rivals Avea and Vodafone (NAS: VOD) . A price war erupted following the court ruling and remains an ongoing drag on Turkcell's operations.
To my thinking, there are just too many moving parts to nail Turkcell down, and I've rated the cell-phone operator to underperform the broad market averages. But obviously I'm in the minority, as 98% of the 885 CAPS members rating the telecom think it can beat the Street.
You can follow along by adding Turkcell to the Fool's free portfolio tracker, so you can have all the news and analysis about its progress aggregated in a single location.
What's wrong with that?
It pays to start your own research on these stocks on Motley Fool CAPS. 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.
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At the time this article was published The Motley Fool owns shares of Clorox. Motley Fool newsletter services have recommended buying shares of Turkcell, Procter & Gamble, Clorox, Take-Two, and Vodafone. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.
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