Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest folks 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. However, today we're going to 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.
Kinder Morgan Energy Partners (NYS: KMP)
MIPS Technologies (NAS: MIPS)
Travelzoo (NAS: TZOO)
Not every short sale goes as planned, which makes 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 a launching pad for further research.
Underdogs still wag their tails
With damage from Hurricane Irene proving less devastating than expected (well, north of North Carolina, anyway), oil prices are likely to soften a bit as rigs and refineries escape unscathed. Yet they remain at elevated levels regardless, so drillers will keep moving the fuel source forward, benefiting pipeline and transport companies such as Williams (NYS: WMB) and Kinder Morgan Energy Partners, which provide the infrastructure to transport and store oil and gas.
Demand for transporting oil over Kinder Morgan's pipelines has been high, and it recently reported its system is oversubscribed by 62%. Enterprise Products Partners is also enjoying high demand, with revenues jumping 49% in the quarter as natural gas and crude oil production continues to benefit from drilling in the shale regions.
Over 1,370 CAPS members have weighed in on Kinder Morgan, and 97% of them believe it will outperform the broad market averages. Head over to the Kinder Morgan Energy Partners CAPS page and see what other reasons the CAPS community has for being so bullish.
Don't trip over MIPS
It was obvious when Google (NAS: GOOG) made its bid for Motorola Mobility (NYS: MMI) that the primary purpose was to enhance its Android platform, but it also got more in the bargain than just a handset maker. Motorola also produces set-top boxes, broadband routers, networking equipment, and hardware for digital security. Google TV will get a boost as computers, the Internet, and television sets and set-top boxes likely converge into a single "smart TV" technology.
Perhaps the Google-Motorola mash-up was what MIPS Technologies' CEO was referring to earlier this year, when he said to wait till next quarter after the company missed earnings estimates. The chip designer has won some contracts with Google's Android platform, and Motorola does use its chips in its set-top boxes. Of course, when that next quarter came and went and MIPS missed again, I was out.
Some analysts are now holding out hope Google-rola will mean new business for MIPS, but I'm not buying into it. Still, Wall Street is still unanimous in its belief MIPS will beat the market averages, and it has a supportive following on CAPS too. But easy2be1 seems to carry my misgivings about management: "Typical example of disconnect between a very valuable technology and a miserable management."
Tell us on the MIPS Technologies CAPS page if the major tech buyout will leave MIPS set for life.
A crash landing?
Management at travel portal Travelzoo is trying to make a big show of support for its flagging stock by buying back a huge slug of it. Half a million shares at around $34 when the buyback was announced would be a $17 million investment in itself. With shares trading some 65% below their 52-week high while priceline.com (NAS: PCLN) is less than 10% below its peak, Travelzoo is looking to take flight again.
Not everyone thinks that's a good idea. The Fool's Rich Smith says Priceline trades at a premium to Travelzoo because it deserves to. It's earning profits while T-Zoo is racking up losses. A buyback will certainly boost the travel site's earnings per share (or reduce per-share losses), but it's a low-quality source of growth.
Even so, CAPS member jmbring is willing to look further down the road than the next quarter or two, and in doing so sees Travelzoo succeeding: "a long term winner, but hard to say at the moment just how big the opportunity is. the ride could be pretty bumpy while we see how TZOOs investments and hiring pays off."
Travel over to the Travelzoo CAPS page to book your own thoughts and add the stock to the Fool's free portfolio tracker.
There's no need to fear...
Underdogs often shine brightest with their backs against the wall. Still, it takes more than a few All-Stars' 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.
At the time thisarticle was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Travelzoo, Google, Enterprise Products Partners, and priceline.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a stress-freedisclosure policy.
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