Top-Rated Stocks the Leaders Loathe

Momentum investors love to back companies with 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. When one of our All-Star players -- those whose stock-picking prowess places them in at least the 80th percentile of our community -- sours on a top-rated stock, perhaps we should take notice. Perhaps the player's found a chink in that highflier's armor, or a question mark in its financial footnotes. Or maybe it's just a hunch. That's why these tables aren't lists of stocks to buy or sell -- just starting points for further research.

Here's a list of stocks that some All-Stars have spurned recently:

Considering that on average, 95% of all investors rating these companies think they will outperform the market, what might have turned some of CAPS' top players against these otherwise widely admired companies?

Not managing well
Managed-care provider Healthways had looked to be in the pink this year --  before Medicaid decided to cancel a unique pilot program, two contracts that had been included in guidance were not signed, and Blue Cross Blue Shield of Minnesota decided to dump it. Although the annual returns might make it look like Healthways doesn't need the intensive care unit, shares are actually trading at less than half the level they were at the start of the year.

Yet things are not so bad for investors. While Medicaid did decide against renewing the pilot program, Healthways, a Motley Fool Stock Advisor recommendation, negotiated an amendment to its contract under which the program will break even rather than show savings of 5%, as per the original agreement. That's key because it's now able to recognize about $5.2 million in revenue in the quarter instead of having to refund that to the government. The amendment also revives hope that the program may live on, with "budget neutrality" being the new watchword. 

Healthways has also been expanding existing contracts, like ones it has with CIGNA (NYSE: CI) -- that renewal is through 2013 -- and international expansion is just getting underway.

Still, it's easy to see why some investors may think the company will fall. At 25 times earnings, Healthways trades at a hefty premium compared with UnitedHealth Group (NYSE: UNH), WellCare (NYSE: WCG), or WellPoint, all of which trade at less than 10 times trailing earnings.

Sentiment still lies with Healthways, because investors see the potential for a rebound. CAPS player FAOFool finds the demographics of its customers to be the driving force behind a resurgence. "This company will rebound strongly due to the payments it has made this past year. Although they have lost some contracts this year, demographics and the need for health coverage will help this company in the long term."

Similarly, WeazG writes that as more employers consider saving on health-care costs, programs like those Healthways offers will prove attractive. "Loss of a few contracts have driven down this stock, but look for them to be a major player as more employers look to improve the health of their employees to realize increased profitability."

Only one CAPS investor, dmgchess, has made a bear case for Healthways, and he looks at the financial situation to back his underperform pick.

Five stars today, that's funny. Doubling its debt in 2007 and expanding into an economic downturn has this one headed way down. Cash flow ratios will [plummet] right along with the stock price.

Make lemonade from lemons
We've seen the direction some investors have indicated they believe these companies are heading, but Motley Fool CAPS is more than what they think, even if they're All-Stars. It's where we invite you to share your thoughts and insights and add your voice to the debate. Go ahead, have your say. We're eagerly waiting!