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 Warren Buffett, Ben Graham, and John 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 doesn't make for automatic buys. But it does offer an excellent starting place for your own research of extreme buying opportunities.

Inquiring minds want to know
As much as we want to think the Internet will drive everything, a bricks-and-mortar presence can still be a powerful force to drive sales. Barnes & Noble is realizing that in its battle against Amazon.com (Nasdaq: AMZN), even though the e-commerce leader has shredded its retail competition up till now.

Barnes & Noble is finding its stores a handy wedge to attract customers by providing a convenient way to pick up a copy of its Nook e-book reader. The Kindle remains omnipotent, of course, and even Borders (NYSE: BGP) is trying to trying to get in on the act with its own branded e-reader. But Barnes & Noble got a bit of a boost when its Nook sales for March surpassed those of the Kindle, with 53% of the e-readers shipped, according to DigiTimes.

CAPS member Jasehawk says Barnes & Noble offers the perfect combination of convenience and selection.

It is really quite simple. Barnes & Noble has a very strong bricks and mortar book selling business. It has done all the right things by dominating college book stores and expanding into e-readers. B & N can leverage its physical assets to drive Nook sales. People will come into B & N stores to read ebooks for free. It is simply brilliant.

No sinking feeling
Either the build-out still underway in the dry bulk shipping industry is a sign that business will pick up, or shippers like Paragon Shipping and Navios Maritime (NYSE: NM) are treading water.

Paragon Shipping announced its intention to build four more ships, with deliveries expected by 2012. Navios has added one Capesize vessel to its fleet and agreed to acquire another. These long-range plans position the shippers for the eventual upturn in demand. Time-charter-equivalent rates have been falling lately, down 20% in the first quarter compared with a year ago, but also off 8% from the fourth quarter.

CAPS member Padrino55 is looking for Paragon to build on its sturdy success:

This stock will be hot. Its balance sheet is everything you would want to read. Low debt, good profit margin and smart use of cash plus a great dividend. As the global economy improves, Paragon will soar.

A bright idea
It takes some faith to put your money into Vertex Pharmaceuticals. The company doesn't have phase 3 trial results for its hepatitis C drug, and many potential therapies in that area have slammed into harsh reality. Assuming the results are good, the company would compete against industry giants Merck (NYSE: MRK) and Roche for a portion of the hepatitis C market. Even so, Vertex has given up the rights for its treatment outside of North America to Johnson & Johnson. What's left to invest in?

The Fool's Brian Orelli says the target market is huge, and drugs from Vertex's rivals fail to cure half of their patients. Furthermore, the lion's share of profits from telaprevir would come from North America. Only the drug's approval remains uncertain; data is expected later this year. Considering all this, it's no surprise that CAPS member JPG101 has doubts:

Good HCV drug. 7.7 billion market cap seems a bit optimistic to say the least? Significant competition coming. Hard to treat patient population.

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, so stop by and tell us which stocks are your own favorite contrarian picks.