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 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:

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

Skeptically skeptical
The comparisons between Baidu.com and Google (NASDAQ:GOOG) are both ubiquitous and necessary. Each is a monster search engine in its respective country, but Baidu partisans note that the demographics still point to incredible growth opportunities in China. Top-rated CAPS All-Star MJKpayday sized up the two a few months ago and, like the old Sesame Street skit, asks which one seems out of place:

Google U.S. market share 60%
Baidu China market share 60%

U.S. Population 300M
Chinese Population 1B

Google market value 150B
Baidu Market value 10B

Which one of these [numbers] doesn't look right?

In the replies to that analysis, it was pointed out that Google is a very different company, noted for its innovation, something that Baidu.com doesn't necessarily have going for it. In response, MJKpayday went on to say that it's not necessary to be Google to do as well as Google:

You're right, there's no doubt Google has some amazing products and services available. However, Baidu does not have to be a Google to have amazing growth. Baidu will grow and prosper in [its] own right. Besides, there's more to the hear and now of Google's innovation, there's the … future, and Google, having hardly tested the rigors of time, is a big DoGG with a target on [its] back.

Gaming the system
NVIDIA is another stock that generates a lot of loyalty among investors, primarily because its graphics processors are an integral part of the gaming platforms that continue to be the bright spot in the semiconductor industry. During the first five months of 2008, the video game industry earned $6.6 billion in revenue, spurred on by the release of blockbuster titles like Grand Theft Auto IV from Take-Two Interactive (NASDAQ:TTWO).

Top CAPS investor JosephStalin says NVIDIA is the dominant force in producing the graphics which breathe life into the games we all want to play:

NVDA is going to be the world leader in 3-D graphics for gaming, which I expect to continue to be a strong market for years to come, especially as the game production in the console wars ramp up. Nvidia's major competition here is [Advanced Micro Devices], which is ... in deep, deep trouble... [I]ts Tegra chip ... blows away anything made by Intel... The primary driving force of Nvidia's strong earnings in the coming year or two will be its dominance of the graphics chip market. However, [its] move into the mobile space and a general shift toward 3-D graphic interfaces in all manner of electronic devices will be what carries the stock for the long term.

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.