These 5 Underdogs Are No Dogs

Short-sellers and hedge funds, although sometimes shadowy, are often seen as the smartest guys in the room. They did their homework and will bet their capital against the crowd. It's not the most popular way to go, but the rewards can be quite lucrative.

On Motley Fool CAPS, we've got our own brand of leading analysts who found chinks in a company's armor and correctly called its fall. "Underdogs" are investors who earned 100 or more CAPS points correctly predicting that a stock would underperform the market.

Let's look at some of the recent calls these All-Star investors have made. Yet, just as hedge fund operators don't always go short, we're going to look at recent Underdog picks no matter which way they've called them.

Not every short-sale goes as planned so it's a risky position to hold. Stock prices can be irrational for longer than you have money to stay in the game. So don't use this as a list of stocks to sell or buy, but rather as the launching pad for further research.

A stinging rebuke
Cops have a saying that they would rather be "tried by 12 than carried by six." In life-or-death situations, some take the actions necessary to go home safe at night even if it means they end up getting sued. Yet we all know that juries can return controversial verdicts, and stun-gun maker TASER got a taste of that last month when a jury said it carried part of the blame in the death of a person who got "tased."

While an appeal is probably forthcoming, it does increase the risk of higher litigation costs for the company as lawyers pile in with similar actions. However, the widespread and safe use of TASERs across the country to reduce the chances of a situation escalating out of control ought to keep the stock from being "carried by six."

All-Star CAPS member Hassjo recognized this potential last month for the Motley Fool Rule Breakers recommendation. "I think the trend is going to be positive for this company, non-deadly force will be a priority," wrote this investor.

Still a glittering opportunity
When the markets were in a handbasket in March and heading to you-know-where, investors fled in throngs to the safety of gold. The precious metal soared to more than $1,000 an ounce only to ease back as concerns ebbed. Earlier this month, those same market forces converged and gold tested its highs again. Though prices have eased yet again, the underlying fragility of the markets remains, making the probability of another run likely.

While stocks of the miners generally move in lockstep -- Kinross Gold (NYSE:KGC), Yamana Gold (NYSE:AUY), Agnico-Eagle Mines, and Goldcorp all jumped in March and have pulled back since -- All-Star CAPS member Scotbgaw finds the golden eggs in Agnico-Eagle a counterbalance to the inflationary measures being utilized to bolster economies:

As I said, simplistic in the extreme. I have no models with fancy ways to predict how much the price of gold will grow, or how much the cost of extracting it will rise. But with the governments of the world printing out billions of dollars each day (and if you have a reason for why that will change please do me a favor and let me know, its kind of a big part of my investment thesis!), I feel that the rising costs will almost always be outgrown by appreciation in the price of gold. Further, we still have a valuation gap between assets and market price.... Good, buy and initial position and wait for a sharp correction in the price of gold (happens every 4 months or so) and then buy some more, rinse and repeat!

It's the same rationale underlying the support investors like ww2004 have given to Agnico's much larger brethren, like Goldcorp: "With inflation going up, the U.S. dollar going down, and considering the state of the U.S. economy, I think precious metal miners are going to do well for the next year."

There's no need to fear ...
When underdogs have their backs against the wall, that's when they can shine their brightest. These CAPS Underdogs have been doing brilliantly with their calls so far, but we haven't yet heard from you. Don your superhero cape and head to Motley Fool CAPS, where your opinion can still save the day.