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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 has 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 spurned recently:


CAPS Rating (out of 5)

Estimated Long-term EPS Growth

CAPS All-Star

Player Rating

Toyota Motor (NYSE: TM  )





Monsanto (NYSE: MON  )





Sina (Nasdaq: SINA  )





Potash Corp. of Saskatchewan (NYSE: POT  )





Mosaic (NYSE: MOS  )





Source: Yahoo! Finance; Motley Fool CAPS player ratings as of June 20, 2008.

Considering that on average, 94% of all investors rating these companies think they will outperform the market, what might have turned some of CAPS' top players against these otherwise widely admired companies?

A crop dustup
Maybe it's the flooding in the nation's breadbasket -- or corn silo -- or perhaps it's the outsized returns they've offered over the past year, but fertilizer stocks are on the outs this week. Monsanto, Mosaic, and Potash Corp. all help farmers grow bigger, badder crops, and at least some investors have become negative about the outlook for each of these companies. Yet there continues to be demand in the agricultural sector, and some are cashing in. Grain company Bunge (NYSE: BG  ) , for example, just announced a bid to acquire corn syrup maker Corn Products (NYSE: CPO  ) in a $4.8 billion deal.

Certainly this is the case for Monsanto. Over the past 12 months, the fertilizer company has more than doubled in price as demand and commodity prices have soared. Yet some investors, like CAPS All-Star BrotherBluto17, feel that perhaps it has come too far, too fast:

Don't get me wrong, Monsanto is an extremely strong and profitable corporation. My concern is that it has become overvalued as [its] share price has hit the stratosphere. I'm also curious if the recent drops in wheat futures and other agricultural futures prices will be reflected in [Monsanto's] performance.

Similarly, some investors are turning the tables on Potash Corp.; they may feel that at 52 times trailing earnings, it has gotten ahead of itself. Potash has more than tripled in price over the year, and top-rated investor Alaethia sees a retrenchment:

Growth has been too fast and frankly isn't warranted. The excessive growth mostly seems to have been fueled by the fear buying going on in several sectors lately. [Potash] has been good to my score, but I think it's time for a correction-down to around 170 I think. It seems to have a small correction about every 6-8 weeks, but this next one might be a bit bigger. Once it gets back to the 170's range, I'll green thumb it again. Hope I'm not ditching my score maker too soon!

Of course, not everyone has forsaken these stocks; many investors remain bullish on the sector precisely because of demand. CAPS All-Star Terok1313 earlier this year wrote that the worldwide demand for crop foods, whatever may happen in the U.S. economy, will push companies like Mosaic higher:

Some people say America is entering a second Great Depression, or that America is about to lose its standing as the last remaining Super Power. ... But rather than avoiding the market and hiding in a shell, I'm watching the development of China, India, and Brazil (to name a few) as a compelling opportunity for investment. While there may be some bumps in the road along the way, the world's demand for energy and agriculture in particular should increase sharply over the coming decades, and this is one of a handful of stocks I've picked to capitalize on this opportunity.

Make lemonade from lemons
We've seen the direction some investors have indicated they believe these companies are heading, but Motley Fool CAPS is more than what the pros think, even if they're 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!

Sina is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.

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10/21/2016 4:02 PM
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