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.
Let's look at some of the recent calls these All-Star investors have made. Instead of studying more of their pessimistic picks, we'll 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
Federal regulators almost ensured the demise of satellite radio, by taking forever to approve the merger of what eventually became Sirius XM Radio (Nasdaq: SIRI). Now, Yahoo! needs the feds to hurry the heck up and approve the search and ad deal between itself and Microsoft (Nasdaq: MSFT), lest the Internet portal become a total nonentity.
The latest comScore data show that while Google (Nasdaq: GOOG) and Microsoft both grew their shares of the search market, Yahoo! saw its numbers slip. Microsoft's Bing still has a way to go before it passes Yahoo! (Bing has a 9.9% share compared with Yahoo!'s 18% slice), but the rival service is steadily growing in popularity. If the government doesn't trip up the plan, a Microsoft-Yahoo! team could make a credible assault on Google's 400-pound-gorilla position.
Yet despite Google's dominance, CAPS member fitpro42 thinks Yahoo! remains the champ in other key areas: "Yahoo is the internet leader in Emails and homepage settings. They are right in the middle of all the demand."
There's a high switching cost involved in some of those services, which explains why, despite the proliferation of Gmail accounts, Yahoo! still sees growth in its own service. (The chance to morph Y! Mail into the new Facebook could also drive future expansion.) Do you really want to comb through your address book to make sure you've notified everyone about your new electronic mailbox? Far easier to maintain what you've got. That kind of hesitance could be the start of what makes Yahoo! great again.
Scratchin' at fleas
Investors hoped the coming holiday season would mark an inflection point for Novatel Wireless's Mi-Fi sales. The portable Wi-Fi network device offers substantial benefits to users compared to USB mobile broadband modems and PCMCIA cards. It seems that Sprint Nextel and Verizon thought so, too; they apparently stocked up on bunches of the gizmos. Yet despite aggressive marketing, Novatel warned us that its fourth-quarter sales will be flat, as orders catch up to inventory.
CAPS member EnigmaDude thinks this could ultimately be the must-have product that differentiates Novatel from its rivals. "Even if they are betting their future on the MiFi it could be one of those breakthrough products that everyone tries to imitate."
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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