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, a 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
Despite the pullback in gold-mining stocks, the continued weakness of the dollar against major currencies like the euro makes gold once again seem like an attractive place to be parking money. Will that lead to a resurgence in interest among the smaller miners like Entree Gold and Great Basin Gold?
Entree is enjoying some renewed investor interest in light of its joint venture with Ivanhoe Mines (NYSE: IVN ) . The two have had a relationship already in place, but the new agreement will be beneficial to Entrée, which can get Ivanhoe to finance some of the joint venture expenses. Also ramping up production is Great Basin Gold, with interests in South Africa and Nevada. While gold majors like Barrick Gold (NYSE: ABX ) are perhaps feeling snubbed by the attention being showered on gold ETFs rather than the players themselves, that's not so with Great Basin, which has plans to double production next year. At least one analyst feels it could be a takeover target.
Although CAPS member goofypicker wrote this assessment of Great Basin last March, it reads as though it could have been written yesterday:
Gold and silver have taken a sudden drop during the past week ... If you look at the fundamental reason behind the last 6 months rise in precious metals, you have to ask yourself ... has anything changed? I don't think so. The Fed continues to pump liquidity into the market, the interest rate continues to decline, inflation continues to increase and the dollar continues to fall. That being said ... if due to demand decreases oil drops sharply from here ... there is a possibility that precious metals will follow. Precious metals will experience quite a bit of volatility and the gyrations may be tough to handle but I think ... that a year from now precious metals will be much higher.
Another oil shock
Designed to track changes in the price of crude oil by holding near-term futures, the exchange-traded fund United States Oil is a unique ETF in that it doesn't invest in individual companies, but rather in oil futures and contracts on the New York and American stock exchanges.
Top-rated CAPS All-Star ww2004 sees an investment in United States Oil as a winner. In ww2004’s view, the soaring price of oil is not a bubble but rather a market shift that has long-term implications. ww2004’s viewpoint is stated in this week-old pitch:
Oil price will be volatile but with an overall upward trend. The huge drop in price the past two days makes this a good time to add USO as an outperform ... I see falling export quantities as the primary driver for the cost of a barrel of oil. It's not speculation. Drilling alone won't lower prices, due to a lack of significant discoveries for the past 40 years ... The decline in consumption in the U.S. and EU won't offset the demand increase from the rest of the world ... On top of all that, factor in: hurricane season, Americans delaying the purchase of heating oil until this fall, Iran, the falling dollar, increasing car sales in China and India, and it's likely we will still see $150 oil before the end of 2008.
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.
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