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

Going against the crowd can pay off handsomely. Some legendary investors were 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 looks at it closely. Similarly, when the masses crowd into one, the skeptical thinker knows 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. They 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. 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

Fairfax Financial Holdings (NYSE:FFH)




Bowne & Co (NYSE:BNE)




CapitalSource (NYSE:CSE)




Frontier Oil (NYSE:FTO)




Under Armour (NYSE:UA)




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

Keeping cool while getting hot
Under Armour, the maker of underclothes that wick away sweat to keep you cool, reported earnings this morning that beat the Street by $0.06 yet still it sold off more than 8% in pre-market trading. Maybe investors were expecting it to guide to even higher revenues instead of inline with analyst expectations as it did.

It's true that it had an expensive valuation and was moving into the shoe market that would bring it up against competitors like Nike (NYSE:NKE) and Adidas, but this Motley Fool Rule Breakers recommendation has always been a market favorite from its IPO. Yet as lead analyst David Gardner noted, it is "building a rock-solid brand in shoes and sportswear that will dominate for decades to come. It's hard to discount that future to a present value, but the key here is to watch Under Armour's brand and reputation. Trouble there would give me more pause than any of the sky-high metrics you could choose to recite."

That's similar to what top-rated All-Star SarahGen says was behind her outperform rating a couple of months ago.

I can't believe how much of the market UA has penetrated! I guess I've become old, but I guess I hadn't been in a sports store for years. My local sports supply store has a section just as big for UA as for Nike, same story at REI. What? That's crazy! And they make clothes for little kids too. I love their new push into women's clothing. Don't listen to people who say it's "too expensive" - that's because they're taking over the world. Clothes, shoes ... And they have plenty of room to grow. They're still way smaller than their big competitors.

Of course, some, like All-Star JR10022, think maybe we ought to just start partying like it's 1999 again. Replying to the above pitch, he wrote,

Wow, it sounds like 1999 all over again -- don't worry about valuations, it's gonna keep going up ... they may one day take over the world, but until then they have to grow into their valuation, and come back to reality ...

Seeing past the obvious
Contrarians look past the headlines. They know that beyond the wrack and ruin of the storm clouds lies a shimmering morning. Conversely, the sun can shine forever, although the crowds may think the green grass and blue skies goes on and on. In the meantime, 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.