Top-Rated Stocks the Leaders Loathe

Momentum investors love to back companies with the wind in their sails. Contrarian investors typically pick up the cigar butts 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. When one of our All-Star players -- those whose stock-picking prowess places them in at least the 80th percentile of our community -- sours on a top-rated stock, perhaps we should take notice. Perhaps the player's found a chink in that highflier's armor, or a question mark in its financial footnotes. Or maybe it's just a hunch. That's why these tables aren't lists of stocks to buy or sell -- just starting points for further research.

Here's a list of stocks that some All-Stars have recently spurned:

Considering that on average, 97% of all the investors rating them think these companies will outperform the market, what might have turned some of CAPS' top players against these otherwise widely admired companies?

A healthy industry to nosh on
Said to be a cross between food and drugs, nutraceuticals supposedly confer both health and medicinal value. Amid changing consumer demographics, wider acceptance of alternative methods of health care, an increased awareness of personal health choices, and a greater desire to take a more active role in those choices, the nutraceutical industry has exploded. Companies like American Oriental Bioengineering, Nutriceutical International (Nasdaq: NUTR), and NBTY (Nasdaq: NTY) are enjoying various degrees of success.

Undoubtedly, natural products offer certain health benefits; perhaps they even have medicinal qualities. Yarrow has been used since the Middle Ages to stop internal bleeding, dill has been used to relieve indigestion, and chamomile was used by ancient Egyptians, Romans, and Greeks to relieve a variety of conditions, such as chest colds. And garlic, now believed by some to help reduce cholesterol -- though one NIH study says there's no benefit -- has been used almost as long to treat smallpox, heatstroke, and edemas. (Not to mention warding off vampires.)

Nutraceuticals and other such supplements are subject to much less regulatory scrutiny than pharmaceuticals. Companies are allowed to assert far broader claims than either pharmaceutical or biotech companies can for their products. It doesn't mean the claims aren't true -- scientists once doubted that vitamins were beneficial, and some still do. It just means that investors need to place their money carefully.

A natural success?
Motley Fool CAPS players seem to harbor little skepticism about American Oriental's ability to outperform the market. Nearly 1,000 investors have weighed in on the nutraceutical and pharmaceutical firm, and 96% assign it a healthy dose of success.

Apparently forecasting U.S. health trends, CAPS investors like stockreader think American Oriental will maintain high growth rates. Here's this player's pitch from two months ago:

[American Oriental] is very well positioned to take advantage of the fragmented Chinese traditional medicine market. The company is very experienced when it comes to buying and integrating smaller companies... The only thing that troubles me is share dilution. The company has a history of getting fresh capital from selling it's shares. But that's something I'm willing to tolerate at the moment because (at current levels) the stock is trading with significant margin of safety.

Yet even the top bullish pitch for the firm by daisytheblacklab seems to contain more than a healthy dollop of skepticism.

Fact is, Asians love buying anything that someone says is good for their health, whether it's true or not. And there's no way traditional Chinese medicine and herbal remedies are going to be replaced by western, evidence-based medicine in China or anywhere else in Asia... I personally wouldn't buy any ... herbal remedies ... but I think the company has rock solid fundamentals.

Make lemonade from lemons
We've seen where some investors think these companies are heading. But Motley Fool CAPS is more than what the pros think, even if they're All-Stars. You're welcome to share your own thoughts and insights, and add your voice to the debate. Go ahead, have your say. We're eagerly waiting!