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:


CAPS Rating (out of 5)


Player Rating

Abraxis Petroleum (AMEX:ABP)




Javelin Pharmaceuticals (AMEX:JAV)




UnitedHealth (NYSE:UNH)




China Direct (NASDAQ:CDS)




Arch Coal (NYSE:ACI)




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 a list of automatic buys. But it does offer an excellent starting place for your own research.

Skeptically skeptical
China Direct is a management company looking for ownership positions in medium-sized companies. It also does consulting for companies based in China that want access to the capital markets here. Finally, it provides industrial-grade chemicals for companies in eastern China.

Its magnesium division continues to be the primary source of revenue for China Direct's business model so far, generating three-quarters of its $60 million in revenue last quarter and 80% of its after-tax profits. The company's chemical division chalked up another 22% in revenue. Chemicals, though, aren't its only thing; it also has interests in toy companies, recycling technologies, and alternative energy companies. Amid one of the fastest-growing economies in the world, and with basic materials still in high demand, China Direct raised its full-year earnings guidance 8% to $26 million, a 77% increase over 2007.

Investors have been bidding up China Direct's shares -- they're up by about 50% to around $9 a stub over the past three months -- as this indirect way of investing in China's economy catches on. CAPS player terminusaquo finds the company cheaply valued, even after the run-up in price:

Great play on magnesium as well as capital services for small Chinese companies. In interviews, the CEO appears down-to-earth, and the company doesn't shy away from exiting a position that has gone sour. P/E is still ridiculously low even after the 52-week run-up. I expect this to be a bumpy but rewarding ride.

Other CAPS investors, like khrushchv, find China Direct a convenient way to invest in China for investors who might otherwise be leery:

I'm a little scared of direct exposure to Chinese companies...I dislike the mercurial nature of the government...So, the best place for me to go after Chines companies is through an ETF and through companies like CDS that offer services to Chinese mentality is that the supply companies got rich during the gold rush but very few gold miners...same idea but replace "gold rush" with "China rush"

Seeing past the obvious
Skeptics know that just beyond the storm clouds lies a shimmering morning. But 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.