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)
chiro85	98.27	Corning (NYSE: GLW  )	*****
symie5	95.37	Sirius XM Radio (Nasdaq: SIRI  )	**

Source: Motley Fool CAPS.

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.

I can see clearly now
Since the first iPad was launched in 2010, Apple (Nasdaq: AAPL  ) has sold 55 million units, and the newest iteration is already becoming a commodity hard to come by. Analysts at Gartner say tablet sales of all stripes will hit 326 million by 2015. That's good news for Corning, which also supplies the majority of the other tablet manufacturers with its Gorilla Glass, including Acer, Asus, Dell, Hewlett-Packard, and more.

The glass technology is also a feature on Apple's iPhone. It's sold 183 million units since 2007 and unloaded 37 million of them over the holidays last year.

Sales of Gorilla Glass remain the primary reason Corning saw revenues jump 19% in 2011, as the glass technology's revenue more than doubled from the year-ago period. Although handheld display devices, tablets, and notebook computers were booming, Corning was still forced to reduce capacity in the segment because other applications for it weren't holding up their end of the business.

Today, Corning trades at just two-thirds the value it did at its peak, but with hefty profit margins and multiples below 10 on a trailing and forward basis, the technology champ seems cheap. Sure, analysts are anticipating virtually flat long-term earnings growth, but with the company confident it can achieve 25% sales growth by 2014 and hit $10 billion in revenues, the analysts may have to revise their expectations.

Today CAPS member davidkware sees a strong management team as being just one reason it will be able to overcome the short-term obstacles:

The glass market has hurt the short-term outlook for Corning, but solid management and the strong internal valuation of the company in addition to the pantheon of products it provides should provide long-term growth. The dividend is just an added incentive.

Add Corning to your watchlist to see whether the glare from its growth trajectory is brighter than for what analysts give it credit.

Reading you five-by-five
Ne'er-do-well satellite radio operation Sirius XM Radio has actually been doing quite well lately, thank you very much, though it leads some analysts to suggest it's seriously overvalued.

The stock had a terrific run since last October, rising more than 78% and trading very near its 52-week highs. It's going to have to overcome the slowing of its top-line growth even though it generates generous free cash flow, and perhaps more importantly, profits. There is growing competition from the likes of Pandora Media (NYSE: P  ) , though I've never been sold on it as a sustained threat, but with better average revenue per user statistics and the ability of car dealers to offer trial subscriptions to buyers for the service -- it's how they lured me back onto the subscriber rolls -- I think they've got the chance to attain a higher orbit still.

Although its low two-star CAPS rating suggests the investment community believes there are better places to put your money these days, more than 5,400 members have rated Sirius, and 82% think it can go on to beat the broad market averages.

Add the satellite radio operator to the Fool's free portfolio tracker, and give us your thoughts on the Sirius XM Radio CAPS page.

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.