These Underdogs Are No Dogs

Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest ones 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 also have investors who find the chinks in a company's armor and correctly call its fall. Our "Underdogs" have earned 100 or more CAPS points by 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
We should really thank the Fed for its silly regulation to dramatically lower the cost of interchange fees. Trust me, it's not because consumers will benefit -- like squeezing a balloon, the costs will pop out somewhere else. It's because it has given investors a big opportunity to buy Visa (NYSE: V) and MasterCard shares at a nice 15% discount.

MasterCard was trading at around $260 a share before the Fed's draconian action; now it's below $220.Visa was at $80; now it's below $70.

Not that the regulations are without consequence. If Bank of America or Wells Fargo limit issuing debit cards or merchants stop accepting them (yeah, right), the transaction fees generated for Visa and MasterCard could take a hit. But as we saw when the government "helped" us by imposing new credit card rules, the banks just socked us with new, higher fees elsewhere. Their fees on ATM withdrawals, for example, are so usurious that even payday lenders blush.

While we're likely to see some impact from the interchange fees, I don't think we'll see a long-term decline in the value of Visa's or MasterCard's business. I think CAPS All-Star bingammj has it right when he suggests the discounted MasterCard is just what many investors were waiting for.

Let us know what you think the impact of the Fed's actions will be on the MasterCard CAPS page or in the comments section below.

In the checkout line?
China may have cut off its nose to spite its face by using its current lock on rare earth metals as a trade weapon. Notice I said current lock. Rare earth metals aren't found only in China. They're plentiful elsewhere; they're just not mined. The U.S. has substantial domestic reserves, according to the U.S. Geological Survey, that account for 13% of the world's total.

China's game of hardball only served to spur action by U.S.-based miners like Molycorp (NYSE: MCP), which just announced it will restart a mine in California. While the Department of Energy says there is the possibility of a short-term disruption in supply, you're going to have a lot more companies like Rare Element Resources rushing in to develop their own properties. Rare Element Resources has a 100% interest in the Bear Lodge property, possibly one of the largest rare earth deposits in North America.

Yet there are a lot of skeptics about Rare Element's potential, with 60% of CAPS members rating the company to underperform. As Revler1082 writes, the company still has to prove itself before it can justify its valuation.

Who in their right minds can justify paying such a premium for a company with no earnings, no revenue, and a plot of land that may or may not be cranking out rare earth elements in five years

Keep an eye on developments at Rare Earth Elements by adding the stock to your watchlist to have all the Foolish news and analysis about it gathered in one place.

A well-dressed opportunity
YRC Worldwide has been pulling out all the stops to turn things around and try to become the viable trucking giant it once was. Gaining concessions from unions, engineering a reverse stock split, and scrambling to extend its refinancing deadline have kept the worst from happening.

The industry is still on wobbly legs, losing almost 150,000 jobs since 2008, and YRC Worldwide is still laboring under low freight volume. It will close 40 of its smallest terminals as it struggles to find the right size. But it will still have a heavy debt load that will put it at a competitive disadvantage to debt-free truckers like Knight Transportation (NYSE: KNX).

However, management's tenacity in saving the company encourages CAPS member akbarcaskey678.

They just renegotiated with Teamsters a couple weeks ago and I always thought the thesis of a "double dip" recession, was unlikely when it was made public and I think is unlikely now so as long as the recovery remains relatively on track, YRC Worldwide will continue [to] benefit and have opportunities to pay down their debt and maybe even renegotiate a more favorable contract with their creditors if business improves better than expected.

Add the trucker to the Fool's free portfolio tracker and then head over to the YRC Worldwide CAPS page and give us your thoughts.

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. 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.