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 have 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 that 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.


Member Rating


CAPS Rating (out of 5)




Caterpillar (NYSE:CAT)





Winnebago (NYSE:WGO)





Hartford Financial (NYSE:HIG)









Quest Diagnostics (NYSE:DGX)



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
Whew! That was close. Black Friday sales bested the best predictions of what the holiday shopping season was going to be, and reports that Internet shoppers slowed's website (while crashing Sears Holdings(NASDAQ:SHLD) store site) have given retailers a reprieve. Moreover, with Amazon's Kindle book reader out of stock, it looks like CAPS member EmmyKaye has it right suggesting the device will be a contributor to earnings going forward:

With their growing list of products and services, I think their earnings will continue to grow. The "kindle" looks like a winning product and can contribute to earnings for years to come.

Also getting a reprieve is Hartford Financial, which will be seeking bailout funds from the Treasury. While some investment houses, like Goldman Sachs (NYSE:GS), have changed their spots to become bank holding companies, Hartford is seeking to change from a life insurance company into a savings and loan to make its cash grab. It's buying a failing bank and morphing into an S&L to gain hold of as much as $3.4 billion from TARP.

CAPS member StagEmployee identifies himself as a Hartford employee who believes not only in the firm's viability, but also management's integrity:

The company and it's management hold the integrity of what the Hartford stands for to heart! The company has been around since 1810, the second oldest financial instituition in the country and plans to be around another 200 years. The Hartford isn't going anywhere... As far as capitalization, there is a big misunderstanding not just with the Hartford, but with the industry as far as capital is concerned. At least with the Hartford, what the media is saying is a problem with capital, which really isn't, but is money set aside for reserves to hold our ratings, not to pay claims. The Hartford has roughly 90 billion in it's general account, with 13.1 billion in statutory surplus. The concern for the industry was ability to hold our AA status. And that was overblown, with 400% the required capital to hold our ratings, and an extra 2.4 billion bank credit, plus now the potential TARP money....

There's no need to fear ...
When underdogs have their backs against the wall, that's when 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. 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. Have fun!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.