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.

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.