When investing in the stock market, it pays to be skeptical. 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. Like baseball's greatest place hitter, "Wee Willie" Keeler, great contrarian investors such as Benjamin Graham, Warren Buffett, and John Neff "hit 'em where they ain't."
Today, I'm looking at a new breed of contrarian: the Motley Fool CAPS "skeptic." These savvy Fools are willing to see both the upside and downside of a stock. While their opinions tend toward the pessimistic, 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 five Foolish CAPS skeptics.
|
Company
|
CAPS Rating (Out of 5)
|
Skeptic
|
Player Rating
|
|
UltraShort Financials ProShares (AMEX: SKF )
|
**
|
SpecBear
|
100.00
|
|
Bank of America (NYSE: BAC )
|
***
|
TDRH
|
100.00
|
|
Newmont Mining (NYSE: NEM )
|
****
|
luvb2b
|
99.99
|
|
Research In Motion (Nasdaq: RIMM )
|
***
|
StatsGeek
|
99.99
|
|
NetEase.com (Nasdaq: NTES )
|
*****
|
nicvo
|
99.98
|
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 future research.
Go west, young man!
Successfully managing the most popular online game in the world's most populous country is no small feat. Lately, it's been proving problematic for NetEase.com. Revenue earned primarily from its Fantasy Westward Journey franchise was flat in the latest quarter compared to the prior-year period, and earnings came in below both expectations and the prior year's efforts. Where The9 (Nasdaq: NCTY ) and Giant Interactive (NYSE: GA ) have managed to grow stronger, NetEase seems to have lost its bearings.
However, NetEase's relatively low price has attracted many CAPS investors. Even though 18 investors think NetEase.com will underperform the market, none of them has actually been able to come up with a cogent reason why. After all, it's a leading gaming company in the hot China sector, trading at an apparent discount. That's what our All-Star from StatsGeek seemed to think when he recommended it back in September: "With Chinese stocks jumping every day like Internet pet grocers in 1999, why not buy a company that is actually pretty cheap on a fundamental basis? NTES fits the bill."
Another All-Star, bankaininja, shares that opinion, finding the company's fundamentals as attractive as the niche it leads:
Another Chinese "online" company. This focuses more on the game sector. With a low P/E ratio and high revenue margins, this company is hard to ignore. Actual growth rates are average, not as high as you might expect for a [Chinese] company, but it is very effective in terms of ROE. Appears to have little financial risk as the liquid assets shown on its balance sheet are more than enough to eradicate its current debt load.
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. What's your forecast? Drop by CAPS and tell us which stocks are your favorite contrarian picks.
RSS Headlines
Fool UK