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 one of automatic buys. But they do offer an excellent starting place for your own research into what might be extreme buying opportunities.
A clear picture
Corning has engaged in some jawboning, trying to talk the market into believing LCD sales won't be as bad as everyone predicted. That fantasy got interrupted in June and was followed by some static a few weeks later. Corning continues to maintain that things aren't as bad as the doomsayers make out. In support, Vizio, the third-largest flat-panel TV maker in North America (thanks to its relationship with discount retailers like Wal-Mart (NYSE: WMT ) ), saw year-over-year growth of 225%.
With high-def remaining the future of television, not to mention the government mandating digital TV next year, CAPS member butter14830 has eyes on the future:
Hi def display technology is taking over, and lucrative deals already in place with major manufacturers... not to mention industry leading clean diesal catalytic converters and development of a yet undisclosed revolutionary laser technology... big things to come with better management than during the fiber optics/photonics a few years ago.
The wind in their sails
T. Boone Pickens' plan to save us from foreign oil includes investing $1 trillion in wind farms. Zoltek would certainly realize some benefit if that were adopted, in part because it provides carbon fibers to turbine manufacturers, as well as selling its materials to the aerospace industry and others. Hexcel (NYSE: HXL ) , however, would probably reap the lion's share since it's the world's largest carbon fiber manufacturer.
Investors like CAPS member PhillyDan believe the Pickens Plan will bolster Zoltek substantially:
Zolt will benefit from the Pickens Plan that is being pushed by T. Boone Pickens. I see substantial growth in Wind Power as well as Solar within the next five years and Zolt is well positioned with their know how and technology to be a strong player in this coming growth.
Age of Aquarius
The harmonic convergence of the late 1980s was supposedly the culmination of Mayan cosmology and an alignment of planets that was to usher in a new age of peace. Certainly broadcast and video-on-demand gear maker Harmonic could have used a little love and understanding when it reported guidance last month that was below analyst expectations. Despite decent second-quarter results showing strong margins on rising volumes, the market dropped the stock more than 20% over the next few days. It has exhibited some better karma recently with the share price recovering much of its lost ground.
CAPS member KipLargo has put his thumb up for Harmonic:
Cable has a lot more room to grow, and as cable grows so do these guys. Also,more data is going through homes, and that's a trend that won't stop. I see these guys as undervalued with a very nice balance sheet.
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. It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Also drop by CAPS and tell us which stocks are your favorite contrarian picks.