Wall Street can't generate enthusiasm for the companies we'll discuss here. So why do our Motley Fool CAPS members disagree? They've bestowed on these companies the highest four- and five-star ratings, signaling their faith that the associated businesses will outperform the market while Wall Street offers lackluster support at best.
So 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 think we know who'll come out ahead. How about you?
CAPS Rating(out of 5)
No. of Analysts
Wall Street Bullish Sentiment
CAPS Bullish Sentiment
FormFactor (NAS: FORM)
L-3 Communications (NYS: LLL)
Suntech Power (NYS: STP)
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 sell 'em 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.
A short circuit
Wafer-probe card maker FormFactor posted yet another period of losses and cash usage as it tries to turn itself around and expects it's going to face a period of weak demand for the immediate future. Management explained that for many customers, DRAM pricing remains below the cash cost to manufacture DRAM chips, so until prices stabilize, chipmakers aren't going to have much appetite for buying DRAM probe cards.
The volatility means FormFactor will continue heading into the advanced system-on-a-chip market that offers a larger potential base to attack, but new products won't start contributing until the second half of 2012.
Fueled by the explosive growth of tablet computers and mobile communication devices, SoC chips are in much greater demand. It ought to play to FormFactor's strengths as more stringent testing methodologies are needed to provide error-free devices. That also makes the space more crowded, and a lot of companies in the broader semiconductor equipment space are suffering weak profits. Teradyne reported a 63% decline in quarterly profits, while analysts expect Applied Materials (NAS: AMAT) to see earnings drop 44% and LTX-Credence (NAS: LTXC) to turn to a loss from making a profit a year ago.
The Semiconductor Industry Association said that after September sales showed a 2.7% uptick, it was encouraged that the trend would continue, which probably helps explain why CAPS members remain upbeat about FormFactor's chances. Add the chip tester to your watchlist, and then head over to the FormFactor CAPS page and let us know whether you think it will continue its transformation.
If the supercommittee on the deficit deadlocks on cutting spending to reduce the out-of-control deficit, automatic spending cuts will kick in, and the Defense Department stands to see $500 billion evaporate from its ledger over the next decade. Already, contractors such as L-3 Communications have felt the pain of budget cuts, as its recent earnings report showed, with revenues falling 1% to $3.79 billion. Even though profits rose, that was largely the result of huge share buybacks.
Raytheon reported less than stellar results, and both Lockheed Martin (NYS: LMT) and Northrop Grumman expect 2012 results to suffer if defense-spending cuts go through.
Highly rated CAPS All-Star member Shouclack says even if you cut L3's revenues in half, it's is still undervalued.
Even if you shrink revenue by 50% over the next 10 years as plan by Obama Admin, this stock sell at nearly 30% below IV...Have a patent portfolio containing 224 patents as per patentgenius.com and it is full of cash with 7.36$/share including long term investment. Large enough safety margin in my book...
You can tell us on the L-3 Communications CAPS page or in the comments section below if you agree, and then follow its progress by adding it to your watchlist.
Solar Energy is the wave of the past. Unprofitable, political, and a bad choice overall financially. It may make us feel good, but make money it does not.
First there was Suntech's statement that sounded an awful like the line from Monty Python and the Holy Grail: "I'm not dead yet!" It said it was still profitable, even after severing a long-term supply agreement with MEMC Electronic Materials (NYS: WFR) , and it had no intention of declaring bankruptcy. But with subsidies dwindling even in China, financial turmoil in Europe, a persistent industry supply glut, and a general lack of demand even with government support making an installation relatively cheap, solar definitely doesn't look like a viable, self-sustaining energy source of the future.
Obviously, with more than 4,300 CAPS members weighing in and the overwhelming majority thinking it will go on to beat the market averages, beefangusbeef and I are in the distinct minority. You can tell us on the Suntech Power CAPS page or in the comments section below why we're wrong, and then follow its progress by adding it to the Fool's portfolio tracker.
What's wrong with that?
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At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Northrop Grumman, FormFactor, L-3 Communications Holdings, Raytheon, and Lockheed Martin.Motley Fool newsletter serviceshave recommended buying shares of FormFactor and L-3 Communications Holdings and creating a bull call spread position in FormFactor. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Northrop Grumman, FormFactor, L-3 Communications Holdings, Raytheon, and Lockheed Martin.Motley Fool newsletter serviceshave recommended buying shares of FormFactor and L-3 Communications Holdings and creating a bull call spread position in FormFactor. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.