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
Cyber bullying is getting more attention these days; parents can take greater control of their kids' Internet usage with free tools available from Blue Coat Systems. I downloaded and installed their "K-9 Web Protection" system on my stepdaughter's computer last year and found the level of customization ideal for providing the protection I want with the experience she's looking for.
Yet Blue Coat is known more for its enterprise-level network security systems than its family-friendly offerings, and that's been a relatively weak area lately, particularly in Europe. After its most recent earnings report followed Websense (Nasdaq: WBSN ) in reporting slack demand, Blue Coat's shares tumbled. However, Riverbed Technology's (Nasdaq: RVBD ) latest earnings gave an indication that maybe the sector will see a faster recovery than expected. At the very least, Riverbed is looking for greater growth.
Investors are bullish, too. More than 93% of the nearly 500 CAPS members rating Blue Coat Systems think it will go on to outperform the broad market averages. Its individual computing security systems may be right for your home, and only you can decide whether the stock belongs in your portfolio. Be sure to add Blue Coat to the Fool's free portfolio tracker, My Watchlist.
All charged up
We suspected earlier this year that with Spartan Motors selling for about half its then-52-week high, the acquisition it made of Utilimaster would help propel the company's performance higher. It was anticipated the maker of vans and trucks for companies like UPS (NYSE: UPS ) and pretzel maker Utz would account for 20% of Spartan sales this year, but even excluding Utilimaster from last quarter's equation, Spartan Motors saw sales jump 40% from last year. Fire trucks and motor homes were big sellers.
That latter category might be able to rebound better in a growing economy, as CAPS member dragin33 suggests. Although the stock trades for just 13 times next year's earnings, it is actually more richly valued than OshKosh (NYSE: OSK ) , which goes for just 8 times profits. A bet on either would be a bet on a better economy going forward.
Let us know on the Spartan Motors CAPS page whether you believe performance will be as Spartan as it has been in the past.
Getting schooled
Maybe it's just a game of attrition. Ride out the storm and hope you can outlast your opponents. With natural gas prices still ravaged by excess inventory, CAPS member bizcbug7 says Ultra Petroleum has the financial stability to survive a prolonged downturn:
NG prices are way down, [Ultra Petroleum] is a low cost producer and can outlive its competitors.
USDE projects a modest increase in NG prices in 2011....but its debatable. Barclays says not.
That debate about pricing does go on. Even T. Boone Pickens has changed his tune. He recently said it won't be until late next year that natural gas prices recover, but just yesterday he tweeted that gas is trading below coal, and that's a situation that "can't go on."
Let us know on the Ultra Petroleum CAPS page how long you think this imbalance in pricing will last and whether investors should sell this stock.
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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