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.
Jefferies Group (NYS: JEF)
Molson Coors Brewing (NYS: TAP)
StoneMor Partners (NAS: STON)
Source: Motley Fool CAPS.
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.
Investment banker Jefferies Group just wants to make sure everyone understands that it doesn't hold the same kind of risk that sent MF Global into bankruptcy. It once again reduced its exposure to European banks, such that it has slashed it by some 75% and now has a negligible net short position of $134 million. Its stock is down 30% since the bankruptcy declaration and is off more than 60% for the year.
Analysts have also worried that Jefferies bit off more than it can chew with its acquisition of Prudential Bache, while the stock has been battered by rumor and innuendo. It published a six-page letter on its website to rebut the allegations, saying it hasn't suffered any loss of big brokerages and that there are no hidden losses related to a partnership it has with Leucadia National.
CAPS All-Star johnnykillz says Jefferies has plenty of cash to support itself and has a strong partner in Leucadia, even if the immediate term will be rocky: "Yeah, I think i-banks might have to take it on the chin for a bit here until I after the election but, on the whole, this is too cheap."
Add Jefferies to your watchlist to keep track of the goings-on.
A sudsy play
Like brewing giant Anheuser-Busch InBev (NYS: BUD) , Molson Coors saw profits slip recently even as it recorded higher revenues. The mass brewers have been crying in their beers over the weak economy, and premium beers from craft brewers like Boston Beer and Craft Brewers Alliance (NAS: HOOK) have been holding up fairly well.
According to the Brewers Association, beer volume sales are down about 1% this year, while the craft segment is enjoying double-digit growth. While highly rated CAPS All-Star TheMiracleDJR humorously identifies cold-beer identification technology as the key differentiator driving Molson Coors in the future (when the mountains turn blue your beer is cold!), the broader CAPS community has already tapped into the brewer as one of distinction, with 96% believing it will outperform the markets.
Add the Silver Bullet brewer to your watchlist and hop on over to the Molson Coors CAPS page to let us know if you'd be willing to tap this brewmaster.
Can't touch this!
The death-care services business necessitates carrying a lot of debt, but funeral home operator Carriage Services (NAS: CSV) has been on an acquisition binge that muddies the waters even if it tries to replicate the success Alderwoods enjoyed pursuing a similar model a few years ago. Its profits have declined in the latest quarter.
StoneMor, the second-largest cemetery operator in the U.S., behind Service Corp., seems to be on a rockier path, turning from profits of more than $2.5 million in 2010 to losses exceeding $6 million so far this year. My Foolish colleague Alex Pape finds most of the information on StoneMor's financial statements meaningless, because of the rules governing how it books revenues and such, but with its willingness to make acquisitions also established, it could be an interesting time in the funeral industry.
CAPS member kevin939516 believes there's a long list of customers for StoneMor, which also pays out a hefty dividend, making it an attractive investment: "This company deals in a business that will never cease to have more clients - Death. With a hefty yield and business booming, what's not to love?"
You can tell us on the StoneMor Partners CAPS page or in the comments section below if you think investors should be dying to get in on this one, and then follow along by adding it to the Fool's 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 contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Boston Beer, Molson Coors Brewing, and StoneMor Partners.Motley Fool newsletter serviceshave recommended buying shares of Boston Beer and Molson Coors Brewing. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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