Short-sellers and hedge funds, though sometimes shadowy, are also sometimes seen as the smartest investors in the room. They did their homework and will bet their capital against the crowd. It's not the most popular way to go, but the rewards can be quite lucrative.
On Motley Fool CAPS, we've got our own brand of leading analysts who found the chinks in a company's armor and correctly called its fall. "Underdogs" are investors who earned 100 or more CAPS points correctly predicting one or more stocks would underperform the market.
Let's look at some of the recent calls these All-Star investors have made. Yet, just as hedge fund operators don't always go short, we're going to focus on the picks these top members are looking at to outperform the market. If they've been making their points being bearish on stocks, it may be worth our while to see which ones they think will succeed.
| Underdog | Member Rating | Company | CAPS Rating |
|---|---|---|---|
| cobradon | 98.98 | Silver Wheaton (NYSE: SLW) | **** |
| VeniVidiVeci | 97.80 | Las Vegas Sands (NYSE: LVS) | ** |
| ilovestocks | 96.12 | Boston Scientific | *** |
| bigbenjewell | 93.03 | Alcoa (NYSE: AA) | **** |
| vierlierer | 92.76 | Visa (NYSE: V) | *** |
Not every short sale goes as planned, so it's a risky position to hold. Stock prices can be irrational for longer than you have money to stay in the game. So don't use this as a list of stocks to sell or buy, but rather as the launching pad for further research.
Underdogs still wag their tails
Remember when George Clooney played the Caped Crusader in Batman & Robin and flashed his Bat credit card ("Good Thru FOREVER!") to bid $5 million on Uma Thurman's Poison Ivy character? Yeah, the part right before you got up and walked out of the theater because your limit for good sense had been reached? Well, Visa is counting on us to maintain our addiction to credit to finance the things we want, need, and gotta have.
It took the recession to make many of us realize that we don't have spending limits like the one Gothcard bestowed on Batman. Ever since, we've been shoveling money into our piggy banks like we're afraid we're going to have to grocery shop in garbage cans. As a result, the nation's savings rate has soared.
That's not good for Visa or MasterCard (NYSE: MA), because if we're not spending, they're not raking in the fees from transactions. Visa's latest results showed that even though we're using our debit cards more than credit cards, it's not nearly enough to offset the decline in overall payment volume.
Yet there are still opportunities for growth. Visa generates only 42% of its trailing $6.7 billion in revenues from sources outside the U.S., compared with American Express (NYSE: AXP), which generated more than $9 billion in 2008. By gaining a larger international presence, Visa could get Europeans to rack up more spending.
CAPS member bobbyabull figures that as we transition to a cashless society, it's going to be Visa's paid-by-the-swipe business model that will succeed:
Long term trend - cashless society. I haven't had a Mastercard in a long time and have never bothered to sign up for American Express. Discover seems lame. Visa is the clear leader in a space with few players. Additionally, defaults mean squat to them. They simply provide the infrastructure. They get paid by the swipe!
No fleas here
It has better margin advantages than its rivals as it purchases and re-sells byproduct silver produced by other mining companies, so Silver Wheaton should see sales volumes soar when a new mining operation by Goldcorp (NYSE: GG) gets under way, since it will be selling the silver Goldcorp brings up. The silver miner's fortunes these days are such that it might even start paying a dividend within the next few years, although it's more focused recently on scoring more acquisitions. CAPS member pwrstrk1 thinks Silver Wheaton's future is as bright as the metal it sells:
Metals futures are bright, with very questionable dollar values. You do not have to own gold to make a money in valued metals. Buy a thousand shares of silver and make 1K every dollar it goes up, instead of a few ounces of gold for a lot more, with less value rise.
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