5 Stocks That Swayed the Skeptics

When investing in the stock market, it pays to be skeptical. In addition to doubting what the analysts tell you, you often have to discount what the companies tell you, too. On Wall Street, going against the grain can reap huge rewards. Like baseball's greatest place hitter, "Wee Willie" Keeler, great contrarian investors such as Benjamin Graham, Warren Buffett, and John Neff "hit 'em where they ain't."

Today, I'm looking at a new breed of contrarian: the Motley Fool CAPS "skeptic." These savvy Fools are willing to see both the upside and downside of a stock. While their opinions tend toward the pessimistic, 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 five Foolish CAPS skeptics:

Just as a list of their worst stocks wouldn't necessarily be good stocks to short, this list of the skeptics' favorites isn't a set of automatic buys. But these stocks do offer an excellent starting place for your own research.

Pfaulting Pfizer's pformula
It's bad enough for a pharmaceutical to face the loss of patent protection on its biggest blockbuster drug. Losing several major drugs to generic competition, while also having little in the way to replace them, might explain why Pfizer investors have been feeling glum lately. Some analysts even think Pfizer could be the worst stock around this year.

Pfizer faces generic competition on its blockbuster drugs Lipitor and Viagra. Recently, it gave up on the inhaled insulin Exubera. Its pipeline drugs to treat pain, HIV, and smoking may generate at most $5 billion a year. Lipitor, in contrast, generates around $13 billion. Moreover, the company's guidance going forward calls for flat to declining sales numbers, which won't make investors too enthusiastic.

So why might a skeptic doubt Pfizer's dour outlook? For one thing, the company has a huge pile of greenbacks -- more than $20 billion in cash and short-term investments -- waiting for the right deal. The pharmaceutical could certainly buy its next blockbuster from a competitor, a possibility that CAPS All-Star AaronRogers puts forth as a reason for being a Pfizer bull:

Loads of cash sitting idle waiting for the right opportunity. In addition they are the laggard within the sector. Tides raise all ships Pfizers time is due.

Others, like PuddinHead42, agree there's plenty of money to be spread around at the right moment. But PuddinHead also posits that the stock's current valuation has already factored in the loss of patent protection. Meanwhile, its healthy dividend pays you to wait out the storm:

At the current price of $23.05, Pfizer presents a good long term value. While their pipeline is a bit weak, they are a strong company with a pile of cash that can buy a new pipeline. Most of the bad news is built in and value investors are starting to show interest. Speaking of interest, they yield over 5.5%, a nice little revenue stream while you wait. Even the Democrats might not be able to drive this one much lower. Buy some now and be ready to buy more below $23. Recent low of $22.24 would be a "back up the truck" opportunity.

Is there more to Pfizer just now than a dividend? The company has shaken up its internal structure to pare away layers of bureaucracy, but the man put in charge is an insider, not someone that analysts consider able to make sufficient changes. We'll need to see whether Pfizer's streamlining efforts can help bring more successful new drugs to market.

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. What's your forecast? Drop by CAPS and tell us which stocks are your favorite contrarian picks.