5 Stocks That Swayed the Skeptics

It pays to be skeptical when you invest. In addition to doubting what the analysts tell you, you often have to discount what the companies tell you, too. On Wall Street, going against the grain can reap huge rewards. Like baseball's greatest place hitter, "Wee Willie" Keeler, great contrarian investors such as Benjamin Graham, Warren Buffett, and John Neff "hit 'em where they ain't."

Today’s new breed of contrarian investor can be found at Motley Fool CAPS, where these savvy Fools are willing to see both the upside and downside of a stock. While their often negative opinions peg them as "skeptics," their top CAPS ratings mean they're right far more often than not. And when they find a stock they actually believe will outperform, perhaps we should take notice.

Here are some recent picks from our list of Foolish CAPS skeptics:

Just as a list of their worst stocks would not be a list of stocks to short, this list of the skeptics' favorites isn't automatic buys. But they do offer an excellent starting place for your own future research.

Skeptically skeptical
It's not surprising that many investors would be skeptical about the future of GPS maker Garmin. The ubiquity of its devices, the inroads being made by cell-phone makers, and the commoditization of global positioning systems have many expecting the top name in GPS device manufacturing to underperform. Garmin, though, has no plans to let others steal market share without a fight -- for example, Nokia (NYSE:NOK), which just won European Union approval to acquire mapmaker Navteq (NYSE:NVT). Garmin’s new nuvifone is a response to the smartphone makers, and its deals with automakers ensure that the Garmin name continues to be synonymous with finding your way.

That’s why some investors, like top-rated CAPS All-Star huddaman, feel that Garmin, with its beaten-down stock price, is such a buy:

When this was at $75, I thought this one would outperform. I think very strongly that it will outperform today, but today the company needs to be half as strong as when it was at $75 to outperform. But its probably just as strong if not stronger. At 10 times trailing earnings, this stock is a value stock. Will it keep up the growth rate of the past? If yes, then its extraordinarily cheap. If it slows growth down to single digit, it still has huge potential to outperform mainly because

a) earnings will grow faster than S&P earnings

b) P/E is lower than S&P's P/E

Only possibly scenario when it underperforms which the market seems to have factored is, if its sales shrink and earnings shrink as a result. Do you really believe with rising cost of fuel, that one is not going to find the use of a good GPS system?

Finally, Asian nations probably do not even know what a GPS is yet. Which means vast growth potential is untapped. India for example does not have digital maps yet, but once they have it, GPS will sell like hot cakes there. GRMN may lead, but even if they are just one of many players, they stand to gain. So one can almost most certainly be rest assured that earnings will grow so fast, so fast that before you know, the price of this stock will be beyond reach.

One lump or two?
Fertilizer maker Sociedad Quimica has not only been benefiting from the surge in commodity prices -- its potassium nitrate fertilizer is cheaper than potash, and the company is said to provide about half of the world's supply -- it also has its thumb in the pie of lithium, of which it's the world's largest producer. Many believe lithium will help in the next stage of shedding dependence on fossil fuels. Lithium-ion batteries are seen as the next power source to fuel our cars.

Few companies, it seems, are straddling such growth industries, and that has investors like CAPS player flottemesch enjoying the prospects of worldwide demand for Sociedad Quimica’s products:

This company is sitting in a good long term secular growth spot.

The fertilizer business should see continuous growth as worldwide demand for food increases as more emerging markets see increasing wealth.

The lithium side of the business should accelerate as worldwide demand for alternative energy continues to see increasing demand.

Seeing past the obvious
Skeptics know that just beyond the storm clouds lies a shimmering morning. Conversely, the sun can't shine forever, whatever the crowds may think. What's your forecast? Drop by CAPS and tell us which stocks are your favorite contrarian picks.