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. 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'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:
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Company
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CAPS Rating
|
Skeptic
|
Player Rating
|
|
ConocoPhillips (NYSE: COP )
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*****
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TDRH
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100.00
|
|
MercadoLibre (Nasdaq: MELI )
|
****
|
chk999
|
99.99
|
|
Under Armour (NYSE: UA )
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***
|
TMFBent
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99.98
|
|
NovaGold Resources (AMEX: NG )
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****
|
DownWithInfidels
|
99.99
|
|
Chevron (NYSE: CVX )
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*****
|
madnessmmmrs
|
99.96
|
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 one full of automatic buys. But they do offer an excellent starting place for your own future research.
Skeptically skeptical
Despite record prices for precious metals like gold, some mining companies seem to endue more than their share of troubles with it. NovaGold is one of them. Last November, it and Canadian partner Teck Cominco (NYSE: TCK ) announced they were canceling their Galore Creek project in the face of rising costs, even as NovaGold was exploring the Donlin Creek project with Barrick Gold (NYSE: ABX ) .
The miner has been trying to restore confidence in its ability to go ahead with Galore Creek while at the same time woo investors back to its stock. Oddly, though, it announced just last Friday that it will not go ahead with a secondary offering as planned -- an offering it had announced only the day before! Citing pricing reasons but nothing more, NovaGold withdrew the offering whose proceeds it had hoped to use to repay funds drawn against its $30 million credit line.
With a gold miner in such seeming disarray, it may be surprising to find that NovaGold commands a healthy respect on CAPS, with 94% of the investors who weighed in saying it will outperform the market. The optimism could be based on NovaGold having one of the largest resource bases of any exploration or development-stage precious metals company. Although the Galore Creek mine is currently stalled, as 50% owner, NovaGold's stake in the copper-gold-silver project is worth a lot should it revive. Further, the Donlin Creek mine is possibly one of the world's biggest undeveloped gold deposits, and NovaGold is a 50% owner there, too.
Planting the seeds for growth
It's NovaGold's varied interests that attract CAPS All-Stars like GS751, who saw healthy cash flows arising as a result early this year.
NovaGold Resources Inc. should soon begin commissioning its Rock Creek mine in Nome, Alaska. The project is ... fully exposed to current metal prices ... should provide $25 to $30 million in cash flow on an annual basis... Additionally, NovaGold has a 50% owner of the Donlin Creek and Galore Creek projects, among the largest undeveloped gold and copper/gold deposits in the world.
Last weekend, CAPS investor uporout found that NovaGold is in a particularly sweet spot for investors: It can either get its assets producing, or it remains an attractive takeover candidate.
This company has very large proven and probable gold [reserves], along with large copper [reserves]. The locations will require some [significant] logistics to get production started. It has large ... partners in these joint ventures ... It should be bought out for twice its current price or it will move on to production.
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.
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