These Underdogs Are No Dogs
Dec 2nd 2011 6:03PM
Updated Dec 2nd 2011 6:10PM
Short-sellers and hedge funds may be shadowy, but sometimes they're 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 also have 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.
CAPS Rating (out of 5)
|goldminingXpert||99.86||Activision Blizzard (NAS: ATVI)||****|
|AirForceFool||99.93||Endeavor Silver (NYS: EXK)||***|
|valuemoney||99.97||National Bank of Greece (NYS: NBG)||***|
Source: Motley Fool CAPS.
Don't use this as a list of stocks to sell or buy -- just the launching pad for further research.
Playing the game
As the fantastically successful fantasy role-playing game World of Warcraft gets long in the tooth, can Activision Blizzard stop the hemorrhaging of its player counts? It says it lost 800,000 subscribers in the third quarter -- at the same time fending off pretenders to the throne, such as Electronic Arts (NAS: ERTS) and its soon-to-be-released Star Wars: The Old Republic, which one analyst says will drain as many as 1.6 million subscribers from the WoW franchise.
While the bears would say the bleeding will continue, bulls point to the success of Call of Duty to show why Activision remains at the top of its game, as it has become the top-selling title at retailers including GameStop, Best Buy, and Wal-Mart.
CAPS member jmbenning suggests that there's little to worry about.
With games Modern Warfare 3, Diablo 3, and Blizzard working on a new MMORPG, the company looks to prosper and remain prosperous. Not to mention a slated Warcraft movie in the works. If there are two franchises that have undying followers, it is Modern Warfare and Warcraft.
Add Activision Blizzard to your watchlist, and see whether there's a role it can play in your portfolio.
A silver lining
The Fool's precious-metals guru, Christopher Barker, has made a bold prediction that silver could hit $100 an ounce, and it could happen sooner rather than later. Investors would naturally want to put Silver Wheaton (NYS: SLW) or Coeur D'Alene Mines (NYS: CDE) on their short list of silver specialists to consider for the portfolios, but Endeavour Silver ought to be one as well.
Already digging in the rock of Mexico, Endeavour is looking to acquire additional mines there, as well as in Chile. Rising silver prices certainly help provide incentives (and financial resources) for such goals. But investors can also profit because even if pricing conditions aren't ideal, it can stockpile and wait for better prices to sell into the market. That's the reason actual ounces sold were down year over year.
Silver's price volatility means Endeavour will use this strategy to smooth out the curves, and CAPS All-Star DarthMaul09 sees it as an opportunity to pick your spots to enter the stock: "Although volatility is unlikely to go away, this stock remains an excellent long-term investment since the silver bull run has many years to go and the mining stocks are severely undervalued relative to the price of the metals."
Add the silver miner to your watchlist, and dig deeper on the Endeavour Silver CAPS page to find out whether there's a silver lining in store.
Slipping on the Greece
Call me a pessimist, but I see the European financial bailout as having only bought a few days of time, maybe weeks, before the euro collapses. Germany's chancellor acknowledges that it won't be a quick recovery to fix what ails the EU, but the thought that there is a general framework for agreement in place has heartened investors, hence that 500-point jump in the Dow the other day.
Yet financial institutions with the greatest exposure to the worst economies, such as National Bank of Greece, will continue to suffer. It just reported losing 7 million euros over the first nine months of the year, not even accounting for the government bond bailout, where it could take as much as a 50% hit on Greek debt holdings.
The European crisis continues to affect other institutions and countries that were previously bailed out, such as Bank of Ireland (NYS: IRE) . While the situation has stabilized in the Emerald Isle, banks there are still under pressure, with Ireland's finance minister calling for extensions of state guarantees to depositors. So fragile is the situation, the least bump might upset the balance.
Although I indicated on CAPS that I thought National Bank of Greece was doomed to underperform the market indexes, I'm in the decided minority, as 94% of the nearly 1,500 CAPS members rating the bank think it will go on to beat the Street. You can tell us on the National Bank of Greece CAPS page or in the comments section below whether you think a run can be prevented, 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 this article was published Fool contributor Rich Duprey owns shares of Best Buy, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of GameStop, Activision Blizzard, Best Buy, and Wal-Mart, and has written calls on Activision Blizzard. Motley Fool newsletter serviceshave recommended buying shares of Wal-Mart and Activision Blizzard, writing covered calls on GameStop and Best Buy, creating a synthetic long position in Activision Blizzard, and creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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