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 members -- those whose stock-picking prowess places them in at least the 80th percentile of our community -- sours on a top-rated stock, maybe we should take notice. Perhaps the member has found a chink in that highflier's armor or a question mark in its financial footnotes. Or it could be 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:

Company

CAPS Rating (5 Max)

Estimated Long-Term EPS Growth

CAPS All-Star

Member Rating

Tongjitang Chinese Medicine (NYSE: TCM  )

****

23%

mikotian

99.92

Suntech Power (NYSE: STP  )

*****

38%

senkihazi

99.76

Healthways (Nasdaq: HWAY  )

****

20%

reallan

99.69

inVentiv (Nasdaq: VTIV  )

*****

24%

APHaggai

96.95

Gentiva Health Services (Nasdaq: GTIV  )

****

16%

jsthwrth

95.63

Sources: Yahoo! Finance, Motley Fool CAPS.

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

Fear and loathing
Tongjitang Chinese Medicine saw its primary product, an osteoporosis treatment called Xianling Gubao, which accounts for three-quarters of all revenue, beset by counterfeits in the latest quarter. That trouble caused sales to fall 26% year over year. Unlike Motley Fool Hidden Gems recommendation American Oriental Bioengineering (NYSE: AOB  ) , which has a number of brand products to bolster earnings, Tongjitang's other products contribute minimally, and their sales were off some 21% as well.

That doesn't deter CAPS member strelioff, who finds the government-monopoly status Tongjitang was granted an additional boost for growth:

-- Xianling Gubao phase 4 trials and looking for FDA approval. still 1-2 years away from approval but rather likely.
-- strong government support. Xianling Gubao has a five-year monopoly on the formula thanks to the government granting trade secret status. Only 20 other drugs in China have been granted this government status.
-- government price protection. Like for drugs but not for coal, gas, steel, and every other commodity.

At the end of last year, the short supply of polysilicon hampered the growth of solar companies, from Suntech Power to Yingli Green Energy (NYSE: YGE  ) . Yet that was seemingly due to a sudden ratcheting up of demand for the key ingredient in many solar-power plays. A number of long-term supply agreements -- as well as investments in the suppliers themselves -- has Suntech and others seeing a sunnier future. CAPS member techfule sees the falling cost of solar implementation as a driver for future growth:

PV panels will not replace mainline, baseload power sources, but that is not the point. Their future in supplementing existing sources during daylight hours (peak load times) is still very bright, and their adoption has been hampered mainly by cost/watt. With fuel costs rising and PV prices falling the future is easy to predict. [Suntech] has lots of competition but they are well positioned to keep an edge in a growing market. Their supply contracts for polysilicon will be an important thing going forward.

Healthways hasn't looked healthy lately, as contract losses and renegotiations have caused it to lower guidance. That probably doesn't change the view CAPS member mrstoops already had on the Stock Advisor recommendation.

The company should be worth the value of its call centers. That's it. Health Prevention services, like those offered at [Healthways], are have a bleak future. Why? Margins are smaller trying to make sick people healthy (i.e. [you] need doctors and medicine not surveys and websites). Until someone can put a dollar value (revenue/cost potential) on the "holistic" market, [Healthways'] other target [market] ... I'll stand on the sidelines.

Make lemonade from lemons
It pays to start your research on these stocks at 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. We've seen the direction in which some investors believe these companies are heading, but Motley Fool CAPS is more than what the pros think, even if they're All-Stars. Let's hear what you have to say!

inVentiv and American Oriental Bioengineering are Motley Fool Hidden Gems selections. Suntech Power is a Rule Breakers pick. Healthways is a Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey has no 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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