The 10 Biggest Outperform Calls in the Market

As an investor, it doesn't pay to follow the crowd.

In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.

Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.

If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.

In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.

That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (akin to a "buy" call) or underperform rating (akin to a "sell" call) in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.

The 10 biggest outperform calls in the market
So, with that methodology as prelude, I present to you the 10 five-star-rated stocks with the most CAPS community member outperform ratings (I used a minimum market capitalization of $100 million and the proviso that they must be listed on a major U.S. exchange). Remember, stocks are rated on a five-star scale by our CAPS community, so five-star stocks are consensus outperforms.

Source: Motley Fool CAPS and Yahoo! Finance. TTM = trailing 12 months. NM = not meaningful.

There are some great companies on this list. At least in my opinion. I personally own shares of Transocean, Berkshire Hathaway, and NVIDIA. Meanwhile, Valero and Johnson & Johnson are both high on my watch list. Valero faces a slumping refining industry and Johnson & Johnson is dealing with recent product recalls. All five of these stocks look like reasonable to excellent buys at today's prices.

More CAPS members think Johnson & Johnson is an outperform than any other stock in the market. Do you think it deserves this honor? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these popular stocks.