Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest guys 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, 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.
Flagstar Bancorp (NYS: FBC)
Newmont Mining (NYS: NEM)
Southern Copper (NYS: SCCO)
Not every short sale goes as planned, making 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 the launching pad for further research.
Underdogs still wag their tails
Asset sales to maintain viability are hardly the kind of confidence-inducing action you want to see your company take, but when it's a bank that's resorting to these tactics, investors and depositors are going to wonder whether their money should be left in the stock or its vaults.
By continuing to focus on its major markets, Flagstar hopes to engender a turnaround, but nonperforming loans continue to hamper the effort. Last quarter, allowances for loan losses accounted for a smaller percentage of loans held for investment but were actually a larger dollar amount than last year, forcing the bank to sell off some of the loans. Those that remain, along with its existing bank branches, are the core of what could be a new and improved financial institution.
CAPS member georgeung thinks management's focus on its prime assets makes good business sense that will pay off down the road.
Flagstar has a lot of potential to move up. If it's really selling off a few of its retail locations to consolidate and focus, then we're talking about a company that's got its eye on the prize. Also, they were the only lenders out there still originating A papers and that will pay off down the line.
Deposit your thoughts on the Flagstar Bancorp CAPS page and see what others have to say about its potential.
Ready, set, go!
While the precarious position of the global economy has been driving up the price of gold -- currently trading around $1,820 per ounce -- the same can't necessarily be said for gold mining stocks. While Yamana Gold (NYS: AUY) is up 30% year to date and IAMGOLD (NYS: IAG) is up 23%, Newmont Mining is up only 5% and Barrick Gold (NYS: ABX) is a mere 1% higher.
Junior miners seem to have had a better return than their larger brethren, and for that reason Newmont says it's foregoing any mergers and acquisitions activity in favor of building more mines. The miners it would be interested in are too expensive.
CAPS member rainmon is looking for national governments to continue policies that devalue their currencies and inflate the price of gold, making miners like Newmont a good bet. The CAPS community as well believes in Newmont's potential, with 93% of the 1,132 members rating the gold miner believing it will outperform the broad market indexes.
Add Newmont Mining to your watchlist and see whether the gap between gold prices and gold miner valuation narrows.
A crash landing?
Copper miners are facing something of a similar divergence between price and value, but theirs is one of demand exceeding supply and the metal's price remaining low. The economic perils boosting gold are having the opposite effect on copper.
A miner like Freeport-McMoRan (NYS: FCX) , with some of the largest gold and copper deposits in the world, has had difficulty straddling the chasm. Its shares are down more than 30% so far this year. It's also facing union actions in Indonesia, a problem confronting Newmont Mining, too.
Southern Copper hasn't been immune either as shares trade 33% below where they started the year. With Peru expected to expand mining production in the country, the copper miner may benefit if the disparity between supply and demand widens, which might happen if the labor unrest causes further shortages. Prices could rise just as Southern Copper is pumping out more metal.
Almost 4,300 CAPS members have burnished their opinions on the Southern Copper CAPS page, and 96% of those weighing in see it standing strong like case-hardened steel.
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-Star 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 PNC Financial Services Group. 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 disclosure policy.
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