These 5 Underdogs Are No Dogs

Short sellers and hedge funds, though sometimes shadowy, are often regarded as the smartest guys in the room. They did their homework and will bet their capital against the crowd. Their approach is not the most popular, but the rewards can be quite lucrative.

On Motley Fool CAPS, we have 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 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. 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 been called.

Going short is risky, since not every short sale goes as planned. 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 launchpad for further research.

Underdogs still wag their tails
Britney didn't have too much luck in her relationship with K-Fed, and Dow Chemical had similar results with its K-Dow relationship. That was the huge, $17.4 billion joint venture between Dow and Kuwait's government, and its disintegration could be affecting its acquisition of Rohm & Haas (NYSE:ROH). Worse for Dow, a similar joint venture with Saudi Arabia may soon also be fodder for a TMZ appearance.

What will Dow do next -- shave its head for the paparazzi? CAPS member nerd1951 finds the company stuck in a troubled specialty chemicals business with little prospect for recovery.

With the Kuwait deal off [Dow Chemical] has a cash problem with its acquisition of Rohm & Haas. Also everyone has such high hopes for this merger but merging two companies of this size is never efficient and will be a drag on profits for a couple of years. In the [meantime, Dow] is stuck in the low margin basic chemicals market with slacking demand. Once petroleum returns to rational prices the cost of their feedstocks will rise further eroding profits.

An enriching investment
There's only one company that enriches uranium in the United States, and that's USEC. With the existence a $38 billion Department of Energy loan program encouraging new construction of nuclear power plants, USEC should be able to benefit from the drive to wean us off our fossil fuels. Exelon (NYSE:EXC) says the U.S. needs 45 new reactors by 2030 to keep nuclear power providing one-fifth of the nation's electricity.

CAPS All-Star Mary953 says the continued development of nuclear potential in this country will power up USEC's stock.

USEC is engaged in turning weapons grade uranium into power plant uranium. They are building the only cutting edge technology plant in the USA and have the government contract for the Weapons to Warheads program to tackle the former USSR weapons grade uranium. Nuclear plants supply a much greater amount of energy to this country than most would realize and, while it is not an alternative fuel named often in "green commercials" it is the fuel most likely to take us into the next century without massive changes in lifestyle.

USEC has the high tech developmental minds that have dealt with this type of work and with other similar opportunities over the years at its helm. The work has been funded, at least enough to get the plant built, and it will not be nearly as painful as it might have seemed even a year ago.

There's no need to fear ...
Underdogs are often at their best when they have their backs against the wall. 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 you're 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. There's more at CAPS than you think.

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