These 5 Underdogs Are No Dogs

Short-sellers and hedge funds, though sometimes shadowy, are often seen as the smartest investors 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 the chinks in a company's armor and correctly called its fall. "Underdogs" are investors who earned 100 or more CAPS points correctly predicting one or more stocks would underperform the market.

Let's look at some of the recent calls these All-Star investors have made.

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 -- just a launching pad for further research.

Underdogs wag their tails
It's hard to imagine more of an underdog these days than Citigroup. The once-proud banking house has seen its stock brought low, now trading almost in penny-stock land. Yet if American International Group (NYSE:AIG) and others were "too big to fail," then certainly Citigroup, with its tendrils stretching around the globe, is indeed monstrously huge.  

The U.S. government saw fit over the weekend to protect Citigroup from its losses while injecting another $20 billion into its ailing coffers. But even with its bounce up to $6 share, CAPS All-Star TXBuilder's argument in favor of a long-term outlook might still be a valid point:

Look guys, I've been around during the tech bubble and am experiencing the financials, but this is the Citigroup... I understand that since it dropped below $5, it may go even lower and we may not see the $55 any time soon, but THIS IS BARGAIN PRICE for long term investors. You will kick yourself ... in 3 to 4 years from now for not getting-in at these prices.

CAPS member dibble905 argues that another seemingly troubled financial, American Express, is not as hard up as it looks. This investor says other companies, like Goldman Sachs (NYSE:GS), are seeking relief from taxpayers, and AmEx doesn't necessarily need the money to be "bailed out.":

American Express ... has a competitive advantage that no other credit card company can simply unseat due to the financial crisis (every credit card company is facing the same issues). With that said, the majority of bearish comments on here suggests problems which are very well known and priced into the stock as of right now. However, due to the hysteria surrounding the financial sector in general, this stock has been pushed deep into the bargain bin. ...

We all seem to believe Amex asking for the bailout cash as a negative. However, please note that over 109 other firms are asking for the same thing. ... some of those 110 firms may not really need it for a 'bailout' and it may be for other intentions. Also, the $3.4B it seeks will assure that Amex will stay afloat at the very least. 

There's no need to fear ...
The Underdogs are here … and they can be heroes. But it takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions. So start your own research on these stocks on Motley Fool CAPS. 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. Top it off by posting your opinions on these or any of the other 5,400 stocks that CAPS' investors have rated.