When it comes to investing in the stock market, it pays to be skeptical. Not only should you not believe everything the analysts tell you, but you often have to discount what the companies are telling you, too.

Going against the crowd can pay off handsomely. Some of the market's legendary investors have been contrarians: Benjamin Graham, Warren Buffett, John Neff, and Marty Whitman. Like baseball's greatest place hitter, "Wee Willie" Keeler, contrarians "hit 'em where they ain't."

When the crowd abhors a stock, a contrarian wants to look more closely at it. Similarly, when the masses crowd into one, the skeptical thinker believes it's time to move on.

A new breed of contrarian
Today I'm looking at a new breed of contrarian, the Motley Fool CAPS "skeptic." Skeptics don't think like most investors. They're willing to see the downside potential of a stock, as well as the upside. CAPS skeptics have rated more stocks as underperforming the market than outperforming it. They're contrarian in that they find more downside potential than upside, but being top-rated CAPS players means they're right far more often than not -- and when they mark a stock to outperform, perhaps we ought to take notice.

Here are some recent picks from five of the top CAPS skeptics:


CAPS Rating (out of 5)


Player Rating

First Marblehead (NYSE:FMD)




Caterpillar (NYSE:CAT)




Peabody Energy (NYSE:BTU)




Baidu.com (NASDAQ:BIDU)








The stocks above are not automatic buys. Just as a list of these players' worst stocks would not be a list of stocks to short, this list of favorites requires a little more thinking and drilling down into the financial statements. But it's a place to start.

No bidding adieu to Baidu.com
In a space where even Google (NASDAQ:GOOG) plays second fiddle to its string quartet, there's growing belief that China's paid-search leader will pop a string somewhere along the way. With a market multiple stretching credulity at 188 times trailing earnings, it seems like there would be room for contraction.

That doesn't deter CAPS All-Star KatWoman50, who believes that demographics will trump any sky-high valuation:

China is barreling into the 21st century so a [Chinese] language search engine has to succeed. Government backed monopoly. High price, but time to jump on the train or get left at the station.

That's a view endorsed by another All-Star, Novavm, with a 99.98 player rating, who compares the Motley Fool Rule Breakers recommendation to a "baby Google." Considering that pundits have been (inaccurately) forecasting the U.S. search engine's fall from grace almost every week, perhaps there's something to be said for a mirror image in China. As Novavm puts it:

I believe this ... is the baby Google! One of the fastest growing [companies] in the world in the fastest growing economy and most populous country in the world.

EPS and Sales growth triple-digit pace for past 10 [quarters]. With high demand for the shares and very low available floating shares (only 12.3 mln per IBD) this is the place to be.

BIDU has only $10 bln market share or less than $8 per [Chinese]. It controls more than 71% of [Chinese] online search market. Year over year EPS growth is 335%.Huge growth potential with fast growing Chinese online internet sector.

In [the] next 3-5 years I expect BIDU to be 70-100 bln company or 7 to 10 x of today['s] value.

Seeing past the obvious
Contrarians try to see past the headlines. They know that just beyond the rack and ruin of the storm clouds lies a shimmering morning. Conversely, the sun can't shine forever, though the crowds may think the green grass and blue skies go on and on. Why not drop by CAPS and tell us which stocks are your favorite contrarian picks?

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.