Top-Rated Stocks the Leaders Loathe

Momentum investors are stock players who get behind companies that have 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. Not only does the 65,000-strong investor-intelligence community rate thousands of stocks every day, but the players themselves get rated, too. The best of the lot -- what CAPS calls All-Stars -- consistently outperform their peers over time and are assigned ratings of 80 or greater.

When an All-Star player sours on a top-rated stock, perhaps we should take notice. Maybe a chink in the highflier's armor has been uncovered. It could be the player has found a question mark in the footnotes of the company's financial statement. Or maybe it's just a hunch. That's why we say these tables are not lists of stocks to buy or sell, but rather starting points for further research. With about 10,000 stocks in the universe to choose from, this list can drastically whittle down that number. Read the pitches for or against a stock, and then dive into the financials.

Here's a list of stocks that the All-Stars have given the thumbs-down to.

Company

CAPS Rating

1-Year Return

CAPS
All-Star

Player Rating

Medtronic (NYSE: MDT  )

****

3.8%

BravoBevo

99.91

Force Protection (Nasdaq: FRPT  )

****

207.2%

choppaz4life

98.41

China Telecom (NYSE: CHA  )

*****

151.0%

GreenAB

96.31

China Unicom (NYSE: CHU  )

*****

95.4%

GreenAB

96.31

Dril-Quip (NYSE: DRQ  )

*****

39.0%

TrackUBS

94.96

More than 2,300 investors have rated these stocks, with 95% of them bullish on their prospects. And 97% of the All-Stars also think they'll outperform the market. So what might have turned some of CAPS' top players against these otherwise widely admired companies?

Is there still a heartbeat?
Medical device maker Medtronic is a non-Chinese company that's had a nice run over the past year. Yet concerns have grown about defibrillator wires breaking while inside patients, and Medtronic just announced it is suspending their further sale. Couple that with the problems Boston Scientific's (NYSE: BSX  ) Guidant had with its defibrillators in 2005, and a $2.3 billion growing industry may effectively become stagnant.

Medtronic bull STORMSTOCKER, an All-Star CAPS player with a 96.78 player rating, may actually have unwittingly provided the best bear case when he noted that its stent market may have been stunted, even though its defibrillator business was still rosy:

They are number 1 in pacemakers, and with the aging population baby boomers, their sales should continue to grow at a steady pace, and certainly beat the SP500.

Their stents have hit a roadblock, but they will figure it out, and get the sales coordinated with the rest of the heart stuff.

Arterial [fibrillation] is affecting something like 300 million people world wide? how many pacemakers in the next 10 to 20 years will be sold to correct that problem alone? Lots!

While there have been setbacks for Medtronic, its $3.9 billion planned acquisition of Kyphon (Nasdaq: KYPH  ) should give it broader exposure in the spinal market. The deal has won EU approval, and Institutional Shareholder Services thinks that Kyphon shareholders ought to vote for it. The 11% drop in Medtronic's price yesterday on the defibrillator wire news may ultimately end up providing a good entry point for investors after the smoke clears.

Make lemonade from lemons
We know there are two sides here, but Motley Fool CAPS is more than a bunch of pros holding forth. It's where we invite you to share your thoughts and insights even if you're the greenest of investors. Go ahead, have your say. We're eagerly waiting!


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