5-Star Stocks Leaders Have Soured On

Momentum investors are stock players who get behind companies that have the wind in their sails. Contrarian investors typically pick up the cigar butts that the market has tossed aside. So what do you call investors who turn against winners? Sourpusses? Shorts?

Over on Motley Fool CAPS, we sometimes call them the savviest investors around. Not only does the 65,000-strong investor-intelligence community rate thousands of stocks every day, but the players themselves get rated, too. The best of the lot -- what CAPS calls All-Stars -- consistently outperform their peers over time and are assigned ratings of 80 or greater.

When an All-Star player sours on a top-rated five-star stock, perhaps we should take notice. Maybe they've uncovered the chink in the highflier's armor. It could be they've found a question mark in the company's financial-statement footnotes. Then again, maybe it's just a hunch. That's why we say these tables are not lists of stocks to buy or sell, but rather starting points for further research. With about 10,000 stocks in the universe to choose from, this list can drastically whittle down that number. Read the investors' pitches for or against a stock, and then dive into the financials.

Here's a list of stocks that the all-stars of the All-Stars -- those with player ratings of 90 or better -- have put the frowny face on.

More than 1,300 investors have rated these stocks, and 98% of them are bullish on their prospects. A like number of the All-Stars also think they'll outperform the market. What might have turned these top players against these otherwise widely admired companies?

All quiet on the bear front
It's a lonely road both ztrategist and talkingdog have taken against the tide of support these companies have been generating recently. In Lloyds' case, perhaps ztrategist sees the subprime lending market ultimately impacting the company, which is what the top bearish pitch (penned by aj350 earlier this year) suggests would happen:

This company runs well, however it is exposed to the same risks of sub prime lending as here in the US. Speak to someone from the UK and they will tell you that their credit situation is as bad as the US's or even worse.

Fact is most of UK banking is being held up by wealthy international money. Eastern europeans, russians, chinese, korean, indians, thai, s. africans, and all of the like are bringing their monies from abroad to have a "safehaven" in london of sorts. The UK is like one big money bank for the world because of its good relations with many third world countries abroad.

Lloyds is really a consumer finance company that is currently being financed by foreigners. Never a good sign (just look at japan, germany, korea, mexico, argentina, etc for the many examples).

Even while looking askance at the immediate prospects of these companies, it's important to give praise to the underlying strength that caused them to earn their five-star ratings in the first place.

Praising with faint damnation
For example, consider the situation PopsDaniecki found himself in when he was critiquing Motley Fool Hidden Gems recommendation OYO Geospace. The company has been operating quite successfully for some time, but it seems richly priced:

EVERYTHING about this company seems to be firing on all cylinders. I just can't see it going very much higher in the current market. For the industry (and the supply side of it at that) the PE is a bit steep and the market as a whole is going to drag this one down with it in the next few months. A nice company to short and then get back in on for the positive after this correction seems to wring itself out (my guess, a year and a few months from now...) Short today, bull tomorrow - if the facts remain the same.

While the stock has ultimately risen higher in the ensuing months, perhaps it's those same valuation concerns that led ztrategist to mark it down in his book, too. Yet with a recently completed factory and no apparent capacity constraints, this might be one that can go higher still. When you compare its stock chart to that of fellow Hidden Gems recommendation Dawson Geophysical (NASDAQ:DWSN), a company in the same space as OYO, you can see they move in a similar pattern, though Dawson has tracked to much higher gains. A blowout quarter, though, has raised Dawson's profile.

Raise your hand
We've heard both the bull and bear arguments here, but Motley Fool CAPS is more than what some pros think, even if they are All-Stars. It's where we invite you to share your thoughts and insights and add your voice to the debate. Go ahead, have your say. We're eagerly waiting!