These Underdogs Are No Dogs

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. However, we're going to 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.

Underdog

Member Rating

Company

CAPS Rating
(out of 5)

TDRH

99.97

Adobe Systems (Nasdaq: ADBE  )

***

InflationSilver

99.97

NVE (Nasdaq: NVEC  )

**

Novavm

99.96

Silver Wheaton (NYSE: SLW  )

****

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
Let's not call it an "iPad killer." Still, Research In Motion's (Nasdaq: RIMM  ) new PlayBook tablet computer is a serious effort to challenge the notion that all of RIM's best ideas are behind it. Featuring portability and a lightweight form factor, HDMI and USB connectivity, and supporting Adobe's Flash technology, it's a weighty addition to a growing segment of computing. Add in high-definition cameras and a dual-core processor, and the PlayBook offers a peek at what Apple's (Nasdaq: AAPL  ) next iteration will probably be.

That's good news for Adobe. With sales of its Creative Suite badly missing estimates, it's going to need more gains elsewhere to prove it can regain investor respect. The software package accounted for more than half of Adobe's revenue this past year, and analysts had raised expectations that it would continue generating such gains. But slack sales to the education market and Japan brought that high-flying talk to a halt.

With Apple and Adobe patching up their dispute over Flash, highly rated All-Star CAPS member nonzerosum sees the software developer getting back on track: "good company, reasonable price. now that apple back pedaled on flash, i think there is upside in the stock because people will want to develop cross platform (i.e. iphone and android) phones."

A dose of reality
It's dizzying to think about how fast electrons must spin to acquire, store, and transmit information. But NVE has been keeping its feet firmly planted on the ground, as it continues to explore ways to get the nanotechnology of spintronics into more mainstream applications. More than a quarter of CAPS members rating the tech specialist can't see it spinning out market-beating results, and its two-star CAPS rating suggests that they think there are better places for your money.

We hear a lot about cloud computing and storage from VMWare, solid-state drives from STEC (Nasdaq: STEC  ) , and the ability of standard storage devices to compete on price from Western Digital (NYSE: WDC  ) . SorgelEquity says spintronics will be the real future of storage technology:

This company specializes in spin technology used for storing data. To get a more accurate view of how their product stacks up against current solid state and disc drives, go to their website and watch their presentation. In short, spin technology is quite, uses less energy, and doesn't deteriorate. This is the coming future of hard drives.

Getting schooled
Can we really call a stock that's more than doubled over the past year an "underdog?" Despite a 125% increase in the value of Silver Wheaton's stock these past 12 months, there are plenty of analysts and investors who consider precious metals like gold and silver overpriced. Even with the Federal Reserve standing at the ready to have the markets awash in easy money (or is that easier money?), some contend we're in a commodities bubble.

There is a silver lining to this: It creates uncertainty, which can help prop prices up and boost their value further. All-Star DarthMaul09 looks for the coming round of earnings reports from miners to be the catalyst for Silver Wheaton to surge:

The third quarter financial reports for the miners will likely beat expectations because of the higher commodity prices and relative stable production costs. This trend will likely continue until real economic growth results in tangible benefits such as improved employment and wage growth.

Need more information before making an investment decision? Put Silver Wheaton on your My Watchlist, and have all the Foolish news and analysis of the stock aggregated for you in one place.

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.

VMware is a Motley Fool Rule Breakers selection. Apple and Adobe Systems are Motley Fool Stock Advisor picks. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a stress-free disclosure policy.


Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 28, 2010, at 7:02 PM, stan8331 wrote:

    The problem with an emerging technology like spintronics is that even if IS the future of hard drives, NVE may not turn out to be a leader or even a significant follower in the field. There are just too many unknowns at this point and plenty of reason for caution.

  • Report this Comment On September 29, 2010, at 1:34 PM, jrmart wrote:

    Apple has already sold millions of IPADS, while all the other companies are talking about ME TOO products. The tablet market is a new emerging market that Apple could potentially come to dominate in the same way that they now dominate the MP3 player market. The new Apple IPAD is quickly replacing PCs in the corporate world and Apple is just starting to penetrate that market. That is reason why all the PC makers and RIM are rushing to enter this market.

    Tim Cook, Apple's chief operating officer, noted on a July conference call with analysts that 50% of Fortune 100 companies are already deploying or thinking about using the iPad. That spells big trouble for all the PC makers and RIM.

    Apple now defines the whole consumer electronic market place with REAL COOL products like the IPHONE4, the IPAD, the now the new IPODs and APPLE TV. These products set the trend, and some even become fashion accessories. Just check out all the ladies wearing different colored IPOD nanos each day to match their outfits. WHO SAID WE ARE IN A BAD ECONOMY. A quick visit to the Apple store might change that outlook.

    If you are strictly talking about Apple as a short term trade, then it might be tired after a quick run from $240 to $292. However, its extremely cheap relative to any other large cap growth stock. Apple should earn about $18 per share next year. Its growth rate and consistent stream of cool products that are easy to use should lead to a PE of 20. That gets Apple to $360. Now add $45 in cash per share and you get $405. Lots of people are willing to pay a PE of 40 for Amazon. If you do the same for Apple then Apple could trade in the seven hundreds. Right now Apple is underpriced and the other ME TOO company investors just don't understand.... Apple is eating their lunch.

  • Report this Comment On September 29, 2010, at 2:54 PM, Aeoran wrote:

    To reach 50% penetration of Fortune 100, all one needs to do is sell 50 units. And frankly, Tim Cook hasn't even promised that - he's simply said that 50 of the F100 are using OR THINKING ABOUT USING an iPad.

    Starbucks probably made more money selling coffee to the employees of the F100 in one day than Apple will make in a year selling them iPads.

    If you were selling your house, would you pop your bubbly as soon as somebody tells you he/she might think about making you an offer?

    As for iPads "quickly replacing PCs in the corporate world" - that seems like pure speculation and wishful thinking for a piece of kit that cannot print, access or be integrated into corporate networks, and run no existing software that F100 would need. And all this is projecting for something that sold a grand total of around 5-6M, vs. the 240M PCs sold during the same period. Get real.

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