Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest guys in the room. They've done their homework, and they're willing to bet their capital against the crowd -- an investing strategy that can be as lucrative as it is contrarian.
On Motley Fool CAPS, we've also got leading analysts who find the chinks in a company's armor and correctly call its fall. Our "Underdogs" have earned 100 or more CAPS points by correctly predicting that one or more stocks would underperform the market.
Let's look at some of the recent calls these All-Star investors have made. But instead of studying more of their pessimistic picks, we'll focus on the stocks these top members expect will outperform the market. If these CAPS investors have scored big by correctly predicting which stocks will fail, it may be worth our while to see which others they think will succeed.
Not every short sale goes as planned, making shorting a risky proposition. Stock prices can be irrational longer than you have money to stay in the game. So don't use this as a list of stocks to sell or buy -- just the launching pad for further research.
Underdogs still wag their tails
Following the acquisition of Schering-Plough, pharmaceutical giant Merck has one of the industry's top drug pipelines, which attracted investors like CAPS member wdh2010, who believes this is underappreciated by the market. Analysts at Deutsche Bank note two of Merck's five new filings, and six out of its 15 phase 3 trials, are from Schering, while it also has 10 separate drugs with sales of $1 billion or more.
That sits well with the CAPS community, where 93% of the members rating the pharma peg it to outperform the broad market averages. Yet Merck remains committed to cost-cutting and still plans to reduce its workforce by 15% to make its goal. We've seen Pfizer (NYSE: PFE ) need to lower its guidance out to 2012 as a result of its own acquisition of Wyeth.
Head over to the Merck CAPS page and tell us whether you think it can inoculate itself from a similar fate of reduced expectations.
Twice as nice
You'll find traditional Chinese medicine maker Tianyin Pharmaceutical is a different kind of drug maker than either Merck or Pfizer, but it is also expanding to include Western medicines such as azithromycin, an antibiotic better known by its brand name, Zithromax. That separates it from other traditional Chinese medicine companies like American Oriental Bioengineering (NYSE: AOB ) and Tongjitang Chinese Medicines, which focus solely on traditional formulations.
Tianyin is flying under the radar of much of Wall Street, and even CAPS, as fewer than 100 members have rated the Chinese pharmaceutical. But of those that have, 99% believe it will outperform the market. Notably, All-Star members have unanimously rated Tianyin to excel. Charlesriver says, based on his time in the country, it is a leading brand name.
Why not provide a dose of your own thoughts on the Tianyin Pharmaceutical CAPS page on whether the dual track it is pursuing is healthy.
There's no need to fear ...
Underdogs often shine brightest with their backs against the wall. Still, it takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions. Start your own research on these stocks on Motley Fool CAPS where your opinion can still save the day. While there, you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.
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