These Are the Top 10 Pharma Underperform Calls

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 (akin to a "buy" call) or underperform rating (akin to a "sell" call) 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 10 pharma underperform calls
So, with that methodology as prelude, I present to you the 10 one- and two-star pharma stocks with the most CAPS community member underperform ratings (I used a minimum market capitalization of $100 million). Remember, stocks are rated on a five-star scale by our CAPS community, so one- and two-star stocks are consensus underperforms.

Source: Motley Fool CAPS. NM= not meaningful.

The first thing you may have noticed in the table above is the slew of NMs. In other words, these companies don't have P/E ratios because they have negative earnings. Because of the drug development process, that's not necessarily as damning in the world of pharma as it is in other industries. Still, the CAPS community isn't impressed with these 10.

More CAPS members think cancer biotech Dendreon is an underperform than any other pharma stock. Do you think it deserves this lack of love? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these popular stocks.

You can see the flip side -- the seven top-rated pharma stocks by clicking here.