Short-sellers and hedge funds, though 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 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. 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.

Underdog

Member Rating

Company

CAPS Rating (out of 5 max)

Call

EverydayInvestor

100.00

The9 (NASDAQ:NCTY)

*****

Outperform

TDRH

99.99

Petrobras (NYSE:PBR-A)

*****

Outperform

AirForceFool

99.98

Martha Stewart Living Omnimedia (NYSE:MSO)

**

Underperform

euphoria96

99.98

Texas Instruments   (NYSE:TXN)

****

Outperform

gtrinvestor

99.98

Western Refining (NYSE:WNR)

***

Outperform

Not every short sale goes as planned, so it's a risky position to hold. 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, but rather as the launching pad for further research.

Underdogs still wag their tails
Certainly the constrained outlooks from both Intel (NASDAQ:INTC) and Nokia (NYSE:NOK) dampen the enthusiasm investors might feel about the semiconductor industry. In fact, CAPS All-Star Option1307 said last month that the chip industry is spiraling downward, and with the economy in a tailspin, Texas Instruments can't be seen as rising above the muck.

The semi-conductor industry is cyclical and currently the cycle is crashing and burning! Do you honestly think there [is] going to be a big surge in electronic products/equipment sales in the near future (semiconductors are needed for these products)? I sure don't. The economy is [bad], thus this company is not going to be increasing sales.

Retail is also struggling. With Martha Stewart Living closing its relationship with Kmart, many investors may feel the domestic diva will have a difficult go of it. Yet back in August, CAPS member junglepilot wrote that there was a good case to be made for a rebound, including new personalities and a new deal with Wal-Mart. Because Wal-Mart is able to thrive in this economy, that thinking might not be so far-fetched.

Martha Stewart is an old brand that was based on old print ad archetype. Her name on product lines though are still sellers. Her new addition, Emeril, is the new Wolfgang Puck. Mix the two together and place in a [Wal-Mart] and you have a new paradigm for a recovering economy where people are looking for a good product at a good price and not a 60's era Blue Light Special ala Kmart on the one hand or pricey Pottery Barn merchandise.

If my daughter's addiction to World of Warcraft is any indication, Chinese online game operator The9 may be able to replicate the earnings success of its latest quarter again and again. Profits more than doubled on a 29% increase in revenues, though analysts had been expecting somewhat more in the sales department. Yet CAPS member SwordAgain writes that the company's potential is limited.

11/17/08, 8:00 PM Cause I don't believe that they will be successful in getting the WOW contract on good terms. I [think] they are a one-trick pony right now.

There's no need to fear ...
When underdogs have their backs against the wall, they can shine their brightest, 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, where your opinion can still save the day. 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.

Wal-Mart, Nokia, and Intel are Inside Value selections. The Fool owns shares of and covered calls on Intel. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey owns shares of Wal-Mart as well as shares and covered calls of Intel, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.