Short-sellers and hedge funds, though sometimes shadowy, are often considered the smartest investors in the room. They did their homework and will bet their capital against the crowd. That may not be the most popular way to go, but its rewards can be quite lucrative.

On Motley Fool CAPS, we've got our own brand of leading analysts, each of whom found the chinks in a company's armor and correctly called its fall. "Underdogs" are investors who 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. Just as hedge fund operators don't always go short, we'll look at recent Underdog picks no matter which way they've been called:

Underdog

Member Rating

Company

CAPS Rating (out of 5 max)

Call

nicvo

100.00

Chesapeake Energy (NYSE:CHK)

*****

Outperform

EverydayInvestor

100.00

Constellation Energy (NYSE:CEG)

****

Outperform

BravoBevo

99.99

STEC (NASDAQ:STEC)

***

Outperform

AirForceFool

99.98

Huntsman (NYSE:HUN)

***

Outperform

mikotian

99.97

Tesoro (NYSE:TSO)

***

Underperform

Not every short sale goes as planned, making shorting stocks 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
Huntsman's failed merger bid has highlighted the dangers of trying to play arbitrageur. Even with court rulings in its favor, the specialty chemical maker agreed to allow Apollo Management to back out of the deal, although it does receive some cash compensation.

That was not the outcome investors hoped for -- including yours truly -- when the merger looked like a win-win scenario a few months back. Huntsman didn't get anywhere near the terms Warren Buffett was able to extract for Berkshire Hathaway (NYSE:BRK-A) following his failed attempt to secure Constellation Energy. But then again, Huntstman didn't walk away with nothing, as shareholders of Canadian telecom BCE (NYSE:BCE) did when a deal with the Ontario Teachers' Pension Plan fell apart.

CAPS member colors1511 thinks that focusing on the merger is shortsighted, arguing that Huntsman's depressed share price reflects neither the long-term outlook for specialty chemicals nor Huntsman's position in the industry:

[Huntsman] has been hurt by recent merger problems. This company is positioned, however, to do well when the economy stabilizes. [Huntsman] devotes attention to developing "green" chemicals. Over the next few years consumers of chemical products will be looking for more environmentally friendly chemical alternatives.

A foundation of shifting sands
Speaking of Constellation Energy, top-rated CAPS All-Star BravoBevo thinks Electricite de France's higher offer for just half the company gives the rest of it a huge boost in value:

Constellation Energy (CEG) turns down the offer by MidAmerican Energy (think Warren Buffet) to buy 100% of the company for $4.7 billion. Then CEG accepts Electricite de France SA's $4.2 billion offer to buy a 49.9% interest in the company's assets.

Buffet doesn't buy anything unless it is screaming cheap. By going with the French suitor, CEG sells a half-interest in the company for only $0.5 billion less than Buffet was willing to pay for the whole enchilada. In other words, doing the French deal just increased CEG's value by 88%. I just cannot see how this isn't a great deal.

There's no need to fear ...
Underdogs shine brightest when their backs are 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.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro, and to receive a private invitation to join, simply enter your email address in the box below.

Chesapeake Energy and Berkshire Hathaway are Motley Fool Inside Value recommendations. Berkshire Hathaway is also a Stock Advisor selection and a Motley Fool holding.

Fool contributor Rich Duprey owns shares of Huntsman, but he does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.