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.
(out of 5)
|jgknot||99.33||Cisco (Nasdaq: CSCO)||****|
|metoo105||99.62||Denison Mines (NYSE: DNN)||****|
|BEAR2008||99.03||Ford (NYSE: F)||***|
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
It wasn't expecting the unexpected or market stupidity that caused Cisco's recent shellacking after it reported earnings and guidance, it was Cisco itself, which proved it wasn't up to the task set before it. Juniper Networks (Nasdaq: JNPR) didn't suffer the same consequences, though it competes in the same space, or F5 Networks (Nasdaq: FFIV). They both reported great quarters. And Oracle handled the outcome with aplomb.
No, it was Cisco's own reluctance in making acquisitions, in using the cash on its balance sheet to shore up its business, that held it back. Sure, the new orders for durable goods report underscored the rough road Cisco had to travel -- new computer and electronics orders dropped 7.7% in October following two months of increases and communications equipment was down more than 12% -- but that shows why it needed to deploy its ample resources sooner.
It also underscores why Cisco will rebound from this crash. Because it does have the money and the vision (CEO John Chambers is no joke when it comes to tackling challenges), you can be sure we'll be seeing the networking equipment leader take a more proactive position going forward. CAPS member JesseJamesA thinks Cisco has a lot of plans on the table:
Cisco is the industry standard for networking hardware. As an IT guy, I choose Cisco 9/10 times compared to the competition. I think this stock has been unfairly beaten down and will rise considerably in the next few quarters. Dividend coming soon as well.
Let us know on the Cisco CAPS page or in the comments section below which ideas Chambers should ramp up first.
Get down on one knee
The CAPS Uranium sector has been hot since Cameco reported higher production guidance. The average stock is up 33% over the past month while Uranium Resources (Nasdaq:URRE) more than doubled. Tensions are rising on the Korean peninsula, not least because the northern half claims it has 2,000 centrifuges capable of developing fissile material for nuclear bombs, and demand in general is growing. It's a volatile time for a volatile sector.
CAPS member cosgrave2 looks at Denison Mines' rich uranium assets in asserting the stock has a long way to go before it peaks:
Demand for uranium has already been mentioned by other Fools but it must be reiterated that uranium is in demand. When China shops for resources, it stocks up and then some. The global demand is there and uranium is still catching up in regards to the bullish increases on other commodities. Increases in the spot price of uranium will push this stock higher (remember the high grades at Wheeler).
Only you can decide whether Denison belongs in your portfolio; track its progress by adding it to your watchlist. All the Foolish news and analysis about this stock will be aggregated for you in one place.
What's so special?
Although it's not a saint when it comes to government handouts, you gotta appreciate Ford's eschewing the bailouts that General Motors (NYSE: GM) and Chrysler accepted and then going on to snare top-selling vehicle honors (the F series pickup was tops overall in October).
While I wouldn't buy GM stock now because the government is going to be unloading a large percentage of its stake in the clunker, depressing prices, Ford offers a compelling opportunity. Rising sales spurred on by innovation make it a good bet that Ford will steal more market share from domestic and foreign rivals.
It's tough to say GM won't be a real competitor, but CAPS member rosssmith20 says Ford's innovative concepts won't be going away anytime soon:
Ford shows strong management and continues to garner investor confidence. also shows promise paying off debt and has some interesting ideas for future development w/ electric cars, etc.
Put the carmaker into the Fool's free portfolio tracker page and then head over to the Ford CAPS page and give us your thoughts on whether it can drive away from the competition.
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