Short-sellers and hedge funds -- oftentimes one and the same -- have been getting a lot of scrutiny lately because of their bearish market calls. Although they mostly prefer to work in the shadows, some, like Greenlight Capital, have on occasion taken quite public stances on companies they think are poised to fall.

Sometimes lauded, more often than not reviled by the public at large, short-sellers are often seen as the smartest guys in the room. They've done their homework and are willing to bet their capital against the seemingly inexorable rise of most companies and markets. It's a tough position to take, but the rewards can be quite lucrative.

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

We're going to take a look at some of the All-Star investors who've achieved this distinguished ranking. Knowing which stocks hold downside risk is just as important as knowing those that have upside potential. Yet, just as hedge fund operators don't always go short, we're going to look at some of the most recent picks of the Underdogs, no matter which way they've called them.


Player Rating


CAPS Rating (5 max)




Petroleo Brasileiro (NYSE:PBR)





Northgate Minerals (AMEX:NXG)





Allied Capital (NYSE:ALD)





Newmont Mining (NYSE:NEM)





Energy Conversion Devices (NASDAQ:ENER)



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 we don't recommend you use this as a list of stocks to sell or buy, but rather as the launching pad for further research.

The future of solar?
Solar energy is expensive, even with government subsidies. Yet with some of those offsets set to expire this year, and the cost of a rooftop photovoltaic (PV) system running at about $8.25 per watt installed, the move toward this alternative form of energy could be stalled. Politicians are talking about both extending and boosting the credits, but with payback running about seven to 10 years in sunny locales like California and about twice as long in places with less consistent sunshine, it remains a pricey proposition.

That's where Energy Conversion Devices comes in, making PVs without expensive polysilicon. A competing version from First Solar (NASDAQ:FSLR) has manufacturing costs of only about one-third per watt that of a comparable polysilcon panel. But because it captures less energy from the sun than its silicon-infused rivals, it tends to be larger and more bulky. Thus, these photovoltaic systems have typically been used in commercial applications.

That's still enough for many investors like CAPS player bbsauve, who remains enthusiastic about all forms of alternative energy in this pitch for Energy Conversion Devices from just a few days ago:

This company commercializes materials, products, and production [processes] for generation of alternative energy and energy storage. Principal commercial products are its thin-film solar modules. I'm bullish on any kind of alternative energy. [The stock] is up year to date 127.76%. This stock is my best pick so far.

A port in any storm?
Some seem to believe that there is a perfect storm brewing for gold prices and that Newmont Mining recently issued the first early warning signal. The cost of mining this precious metal has been rising, which could end up delaying new projects or the opening of new mines.

Not everyone thinks there's more than just noise surrounding the commodities. CAPS investor Bobcat08 writes that Newmont's recent earnings report is enough to drown out any static:

Earnings increase of 444%, 119% increase in operating margin, still shaky on the dollar. Sure, gold and other precious metals might get bouncy in the short term, but I'm keeping my horizon on the long term. Block out the NOISE.

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 if we haven't yet heard from you, don your superhero cape and head on over to Motley Fool CAPS, where your opinion can still save the day.