5 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. 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 the downside of a stock. While their often negative opinions peg them as "skeptics," their top player 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:

Company

CAPS Rating (5 Max)

Skeptic

Player Rating

Chubb (NYSE: CB  )

****

nicvo

100.00

Yingli Green Energy (NYSE: YGE  )

****

DemonDoug

99.98

Geron (Nasdaq: GERN  )

***

MakeItSeven

99.98

Indevus Pharmaceuticals (Nasdaq: IDEV  )

****

luvb2b

99.98

Wachovia (NYSE: WB  )

*

d1david

99.97

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 of automatic buys. But they do offer an excellent starting place for your own research.

Skeptically skeptical
The potential to regenerate body parts and organs may sound like the stuff of science fiction, but stem-cell research holds just such promise. Stem cells are what allow our bodies to grow and heal. However, the field has been steeped in controversy because the use of embryonic stem cells -- those taken from fetuses -- has raised ethical questions.

Adult stem cells, on the other hand, don't hold such concerns, but they also don't hold the same regenerative powers that embryonic stem cells do. You can turn embryonic stem cells, but not adult stem cells, into virtually any cell type you want: That's why they hold such potential. However, it seems to be possible to reprogram adult stem cells to do the same trick. If that turns out to be true, it would eliminate the ethical dilemma. But this science is still in its infancy. Pfizer (NYSE: PFE  ) is investigating adult stem cell therapies for diabetes-induced retinal damage, while Cytori Therapeutics (Nasdaq: CYTX  ) is studying the potential of stem cells found in the body's own fat tissue.

Geron, though, has been a leader in embryonic stem cell research and recently reported that a heart-failure therapy has passed a very early-stage test. It's also exploring treatments for cancer and diabetes. Investors hold a lot of hope for Geron and other stem-cell research companies because both candidates for president support expanded stem-cell research. That's why some investors like CAPS member zheindel believe the company is on the path to profitability.

With a new president being elected this stock will get a huge boost of government money, regardless of who the elected president [is]. With this research the stem cell company will make great strides in curing Diabetes and other [diseases,] making the stock profitable.

One lump or two?
Indevus Pharmaceuticals is one pharmaceutical that has borne the brunt of what seems to be capricious regulatory interference. The Food and Drug Administration set back its hypogonadism therapy Nebido because of a single instance of a U.S. patient coughing when the treatment was administered, along with a few similar incidents in Europe. Nebido is already approved in Europe and carries a warning label noting that such rare side effects may occur.

The FDA subsequently gave Indevus recommendations to put the experimental testosterone drug back on track to regulatory approval. The guidelines the company received make it optimistic that Nebido will be approved here in the States.

CAPS members like fojaha find that even with the Nebido hurdles, Indevus remains an attractive investment because it's more than just a one-drug company.

Indevus was bid down as a result of FDA conditions for new drug nebido. Traders have ignored the fact that the company has other products on the market. Sanctura & sanctura xr, Vantas, supprelin, and delastestryl... Seven more drugs in development. Valstar, a bladder cancer drug is most advanced. No huge sellers, but combined it makes a pretty good revenue stream.

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.

Pfizer is both a Motley Fool Income Investor and an Inside Value recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 21, 2008, at 10:33 AM, geoffreyiles wrote:

    Your comments on Geron miss the most important stem cell based product they are developing. They currently have a Phase 1 application (an IND?) in to the FDA, since the 1st quarter to inject spinal chord cells into patients who have received complete spinal chord lesions through traumatic accident. They have demonstrated that this works in rats, some 2000 of them! If, a big if, the FDA approves the phase 1 trials, then this will be a true first.

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