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 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 aren't automatic buys. But they do offer an excellent starting place for your own research of extreme buying opportunities.
Inquiring minds want to know
The consensus is Provenge ought to be a multi-billion dollar blockbuster for Dendreon, yet its stock keeps dropping. With earnings looming, it could signal skittishness that early sales of the cancer drug won't live up to expectations, but its not till next year that things are expected to heat up. A drop in price ought to be an opportunity to buy a future winner at a cheap price.
Yet there are potential problems aside from Provenge's sales. One is its astronomical cost. At more than $90,000 a dose, it ain't cheap. Also, the treatment's main rival, Taxotere from Sanofi-Aventis (NYSE: SNY ) , could see generic competition as soon as this November, which would be just as Dendreon is gearing up its sales reps. Dendreon also won't be up to full manufacturing capacity for a while yet, which could hold back growth potential.
CAPS member JDR524 identifies himself as Dendreon's target customer, but says he's put off by many of these issues:
As a Medical Oncologist, I will be Dendreon's primary customer. Right now, I have many reservations about Provenge including price (the old guys I take care of mostly lose interest when I tell them it will cost $93,000), access, (it will only be available in major markets), and toxicity (usually higher in the real (non academic) world. Taxotere (Provenge's main competition) will be generic soon, and several other promising prostate cancer drugs are in the near term pipeline.
No sinking feeling
Like swallows returning to Capistrano, investors are certain that the dry bulk shipping market will once again march on its previous highs. However, that doesn't seem like it will be occurring anytime soon. The Baltic Dry Index, which some suggest is an important barometer of global demand, is in freefall these days, falling 40% in June alone.
There's more than just demand that will play havoc with DryShips, Genco Shipping & Trading (NYSE: GNK ) , and Excel Maritime (NYSE: EXM ) -- vessel inventory, for example. The industry isn't looking good on that front, either.
DryShips has its own issues as well, such as its exposure to the Gulf oil spill. It owns a fleet of dry bulk carriers and offshore oil deepwater drilling rigs, and though the moratorium in the Gulf has been lifted by court order, there's still a lot of uncertainty remaining.
Despite the BDI cratering, the CAPS Dry Bulk Shipping sector is off only 6% over the past 30 days. Shippers like Diana Shipping (NYSE: DSX ) have fallen pretty much in line with the sector, but DryShips and Genco are off mid-teen percentage rates. Excel and Navios Maritime (NYSE: NM ) are inched just 3% lower.
CAPS member jimdobry says a bird in the hand is worth two in the bush, and he's betting on our addiction to oil to ultimately pull DryShips back up:
This stock has been hit hard because of its deep water drilling segment. The world will continue to need more oil and Dryships will profit from it.
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.
RSS Headlines
Fool UK