Wall Street Loves These Stocks. Should You?
Jun 12th 2012 5:24PM
Updated Jun 12th 2012 5:26PM
Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?
Not so fast! With help from the 180,000 members of Motley Fool CAPS, we'll see whether these highflying favorites deserve analysts' unwavering support. But just because Wall Street loves 'em doesn't mean you have to. Analyst sentiment is just the jumping off place for your own research.
Connecting the dots
I'm probably acting something like a Luddite who dismisses all technology out of hand, but it's gotten to the point where I'm getting ready to ignore "scientific studies" regardless of what they say. And I'm not talking about junk-science claims like the team of Swedish scientists who said potato chips could give us cancer without also noting you'd have to eat more than 60 pounds of them ... a day ... for life ... to get the same cancer-causing chemicals into our bodies.
No, I'm referring to more mainstream work that one day says milk is good for you, but the next it's bad. Or that red meat is harmful -- until it's not. Admittedly it's dangerous on my part to stick my head in the ground, and while I'm glad someone's working on getting at the truth, sometimes I get the feeling it's better to ignore what the scientists say because in a couple of weeks a new study will come out proving the exact opposite.
The latest entrant in contradictory science is that omega3 fatty acids, the kind you get from fish oil and which generate billion-dollar sales for GlaxoSmithKline and Abbott Labs (NYS: ABT) , doesn't prevent heart attacks at all. According to the study by McMaster University, taking fish oil gave you the same chance as a placebo in not having a heart attack, stroke, or chest pain.
While GSK's Lovaza generated nearly $1 billion in sales in the U.S. last year, giving it an incentive to want to promote fish oil's healthful benefits, rising fish-oil salesmen like Amarin (NAS: AMRN) are going to be put out if the conclusions of that study hold up to closer scrutiny. Its AMR-101 is expected to compete head-to-head against Lovaza, and because it doesn't raise bad cholesterol when lowering triglycerides, it's likely to steal a large slice of the market from the pharmaceutical giant.
And it's an interesting conumdrum since GSK, Abbott, and Amarin have all conducted clinical studies of their own, submitted them to the FDA for review and approval, and have generally found such oils essential to better health. In short, someone's gotta be wrong here.
I've liked what Amarin has shown so far, and I believe its therapy will hit the market and be a successful product. I think the success will propel the drug developer to new heights, and I've rated it on Motley Fool CAPS to outperform the broad indexes. With 94% of those in the investment community also thinking highly of its chances, I don't think taking an ostrich-like stance is necessary here.
But let me know in the comments box below or on the Amarin CAPS page if you think I'm being foolish for ignoring what science is telling me, and then add the stock to your Watchlist to see whether it ends up proving the latest studies wrong.
Well, there are no studies suggesting the microturbines made by Capstone Turbine (NAS: CPST) don't deliver the energy-efficient heat and power it says they do, but that hasn't stopped its stock from falling more than 40% from recent highs. More than likely it has to do with its growing reliance on the gas industry for sales at a time when drillers like Sandridge Energy (NYS: SD) and Ultra Petroleum (NYS: UPL) are selling assets and cutting back on the number of rigs drilling to regain control over a business still weighed down by too much inventory.
Oil and gas drillers use the microturbines to power their rigs in remote areas, and its 1,000-kilowatt unit microturbines are well suited for utility substations and larger commercial and industrial facilities. Capstone has sold more than 150 of its low-emission C65 microturbine units to a customer in the Eagle Ford Shale region in the past nine months, with 30 of them being ordered just this past April.
While it might be difficult to say when the supply glut will break and pricing power will return to the nat-gas industry, I'm confident it will eventually right itself, at which time the groundwork Capstone has been laying will pay off for it. Even if these microturbines can be used just about anywhere, the energy sector is where it expects the greatest dividends to be paid.
CAPS All-Star members are a bit hesitant about its immediate future, with more than a quarter of those rating the turbine maker believing it will outperform the market, but the broader community is more confident in its ability to pull it out (94% say it will beat the Street), and the seven analysts following Capstone unanimously agree.
I've rated it to outperform, too, but add Capstone Turbines to your Watchlist to see how quickly it will generate new profits to power itself stock higher again.
Agree to disagree
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At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Check out his holdings and a short bio . The Motley Fool owns shares of Abbott Laboratories and Ultra Petroleum. Motley Fool newsletter services have recommended buying shares of Ultra Petroleum. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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