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 thecompanies tell you, too. On Wall Street, going against the grain can reap huge rewards. Investors such as Warren Buffett, Ben Graham, and John Neff abhor the "wisdom of crowds."

Today's new breed of contrarian investor can be found at Motley Fool CAPS, where 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 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 a list of automatic buys. But it does offer an excellent starting point for your own research of extreme buying opportunities.

Inquiring minds want to know
The parallels between InterMune's collapse and Dendreon (Nasdaq: DNDN) are obvious because shares of both soared after the biotechs scored advisory panel approval for their drugs, then crashed and burned after the FDA itself shot them down. The agency apparently was in a dour mood last week because it also rejected the kidney transplant therapy from Bristol-Myers Squibb (NYSE: BMY) that had won support from an advisory panel.

InterMune investors, still smarting after their stock lost 75% of its value, are obviously looking for a repeat of Dendreon's eventual success. Highly rated CAPS All-Star and biotech follower zzlangerhans still believes that InterMune will successfully navigate the rapids of the FDA's approval process.

Anyway, lots of people have realized that the market over-reacted to the FDA Complete Response. So the company took a shot at approval on shaky data and they missed. It isn't their fault the market massively overvalued their prospects. They have cash, they'll run another phase III trial, the share price will run up over 20 prior to the topline data.

While it's true InterMune may yet win approval -- even fellow Fool and biotech authority Brian Orelli offers hope that it could use clinical test data from Japan -- investors should remember that it took two years before Dendreon's stock showed any signs of life. There's no reason to rush back in just yet.

Sowing improvement in China
Hybrid crop-seed producer Origin Agritech finds itself on the outs with investors like CAPS All-Star solitaryway because it has a sorry history when it comes to profits.

Three times sales for a company […] with declining revenues that has never made money. Over the last 4 months, SEED has been just a manipulation stock that looks to squeeze shorts any time the stock gets depressed (i.e. the fundamentals begin to take over...)

The nature of Origin Agritech's business causes it to generate almost all its revenues in the third fiscal quarter, so results are lumpy, but it hasn't had a profitable year since 2006. Losses, though, are slowly narrowing.

Despite the Chinese company earning just one star, 70% of the CAPS members rating it indicate it will outperform the market -- maybe hoping it will become the next Monsanto (NYSE: MON). It has received the first government endorsement of its genetically modified corn seed, and China generally prohibits foreign companies like Monsanto and Dow Chemical (NYSE: DOW) from selling their own GMO seeds in the country.

Plant your own opinion on the Origin Agritech CAPS page.

A bright idea
It has been a year since Sequenom rocked investors with the news of employees' data mismanagement for its novel Down syndrome test, yet I was still surprised to hear that it had settled the various class action lawsuits for the relatively small sum of $14 million, considering it hasn't resolved whether the test is still viable. Settling the lawsuits now seems to portend bad news, because there would've been a more expensive payout if the settlement came after it was revealed this was more than just a simple case of mishandling the data.

CAPS member hjhatl disagrees, believing that ousting management and installing new key industry players is good news.

The new management change has shaken things up and the fallout of that is evident in the products coming to market. I believe management is being low-keyed about the company due to the lawsuit judgment forthcoming and the past history of the tainted T21 testing. Mr. [CEO Harry] Hixson is a seasoned veteran in this field and is building a portfolio of successful product releases based on the same foundation used in the T21 test.

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. It pays to start your own research on these stocks on Motley Fool CAPS, so stop by and tell us which stocks are your favorite contrarian picks.