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 (i.e., a "buy") or underperform rating (i.e., a "sell") 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 top 7 pharma buys
So, with that methodology as prelude, I present to you the top seven stocks that are involved in the pharmaceutical industry based on the number of CAPS members who have rated the stock an outperform. Only stocks rated the maximum five stars are included.

Company

Market Capitalization (in millions)

Outperform Picks

CAPS Rating (out of 5)

Johnson & Johnson (NYSE: JNJ)

             $160,170

     12,670

*****

American Oriental Bioengineering (NYSE: AOB)

                 $178

      3,036

*****

Exelixis (Nasdaq: EXEL)

                 $313

      2,441

*****

Gilead Sciences (Nasdaq: GILD)

              $28,770

      1,977

*****

Abbott Laboratories (NYSE: ABT)

              $77,290

      1,881

*****

Teva Pharmaceutical Industries (Nasdaq: TEVA)

              $44,870

      1,807

*****

Bristol-Myers Squibb (NYSE: BMY)

              $44,980

      1,488

*****

Source: Motley Fool CAPS.

More CAPS members think Johnson & Johnson is a buy than any other pharmaceutical stock. Do you think it deserves to be the No. 1 buy? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these popular stocks.

As for me, I think Johnson & Johnson is a buy at today's prices and am going over to CAPS and rating it an outperform. See my CAPS profile here.

Anand Chokkavelu owns shares of Exelixis. Exelixis is a Motley Fool Rule Breakers selection. Johnson & Johnson is an Income Investor selection. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of Exelixis. The Fool has a disclosure policy.