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. Investors such as Buffett, Graham, and Neff abhor the "wisdom of crowds."

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 the 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 research of extreme buying opportunities.

Inquiring minds want to know
It's time for even the most diehard fan of Crocs to admit the shoemaker's plastic footwear was a fad. The trajectory its stock took and the dramatic drop-off in sales are symptoms of how a fad product reacts. But it's OK now for Crocs adherents to drop the pretense that the shoes were a fashion statement with staying power because the company itself is admitting that reality, and that's good for both it and investors.

Crocs is branching out away from its signature shoe to bring new, different, and more exciting styles to market. I was surprised by a Crocs kiosk recently because the shoes appealed to a broader swath of the consumer market than the ugly clogs that comprised its mainstay offerings before.

Of course, by going mainstream, it brings up a different set of potential problems including having to compete directly against more traditional footwear companies. Nike (NKE) is a giant here and even Decker Outdoors (Nasdaq: DECK) can't be discounted. Yet I see Crocs as having a better chance of succeeding now than before.

The makeover hasn't won everyone over, though. CAPS All-Star member kkconway thinks investors have benefited from short-sellers bolstering the price, but shiko250 says consumer spending is still key and right now that's not working in the company's, or investors', favor.

CAPS member alandefeld, however, says most criticism is based on old data. Crocs is a different company today, one that will easily beat the market.

The company's performance shows that a sizable global population like the company's brand and is responding to the ongoing retail, marketing, and social media effort. I've been a [Crocs] bull since August 2008, and purchases made along the way have paid off handsomely. I believe that much upside remains, both in the company's global performance and in Mr. Market's price of the company's value. This stock will easily outperform the S&P in 2010.

Out of neutral
Analysts were already worrying about increasing competition from Level 3 Communications (Nasdaq: LVLT) pressuring profits at Neutral Tandem, a network connection services provider. A recent U.S. Patent & Trademark Office ruling rejecting all 23 of Neutral's claims in a patent that's been the subject of litigation with privately held rival Peerless Network has them seeing it possibly lose more market share as well.

The stock is well off its highs and fell again in the aftermath of the decision last month, but CAPS member ruinas sees it reverting to its prior growth trajectory. The CAPS community apparently agrees it's one that may participate in a small-cap rally to come as 98% of nearly 1,000 members have rated it to outperform the market.

Sticking with STEC
STEC is also under competitive pressure with Seagate Technology (NYSE: STX) releasing its own solid-state drive, but despite inventory issues, STEC is the front runner, and with SSDs likely to become the standard sooner rather than later, it stands a good chance of capturing the lion's share of the market.

CAPS member littlebigguy says the market keeps hammering away at the company despite a record of rising revenues.

Revenues and Earnings continue to increase quarter after quarter, yet the share price keeps getting hammered. With a short interest of 12.6 million shares out of a float of 40 million shares, if this is a bottom we could see a nice run as the shorts begin covering.

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. What's your forecast? Drop by CAPS and tell us which stocks are your favorite contrarian picks.