Short-sellers and hedge funds, though sometimes shadowy, are sometimes 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 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.

Underdog

Member Rating

Company

CAPS Rating
(out of 5)

Call

traviskang

98.73

ING Groep (NYSE:ING)

****

Underperform

Wharton93

98.11

Alcoa (NYSE:AA)

****

Outperform

spirit5458

97.94

ACE Limited (NYSE:ACE)

**

Outperform

Terapixel

95.34

Wells Fargo (NYSE:WFC)

***

Outperform

madmoney151

94.04

Sun Microsystems (NASDAQ:JAVA)

**

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
In the words of the immortal sage Yogi Berra, "It's deja vu all over again." A beaten-down company is offered the chance of a lifetime merger, but talks tough and the deal falls apart. Where have we seen this before? Oh, that's right. Yahoo! (NASDAQ:YHOO) did that just last year with Microsoft.

Now we've got a repeat performance, with Sun Microsystems rejecting the proposed buyout offer from IBM (NYSE:IBM).

While the similarities are striking, there are enough differences to suggest the outcome might not be the same. Jerry Yang had been the sticking point in the Microsoft gambit, holding out hope for an even higher bid than the princely sum Steve Ballmer was offering. In this case, Sun CEO Jonathan Schwartz is said to have favored the IBM deal, but a faction led by chairman and Sun founder Scott McNealy was opposed. Sometimes it's difficult to let go of the empire you created.

Many people are anticipating this deal will still go through. Although Sun's stock tumbled 23% yesterday after news broke that the deal collapsed, it remains above the level it had been trading at before the original proposal was revealed. Along with some high-caliber investors that might be excited to see their investment pay off -- private equity firm KKR and Southeastern Asset Management, for example, have large stakes in Sun -- there's a natural alignment between the two companies that makes sense as Sun switches away from servers and looks toward software for its future. It's just that change might not be coming fast enough for Sun to transform itself into a mini-IBM: Servers still comprise the largest portion of Sun's revenues, contributing more than 42% of its total revenues last quarter.

But it's the rapid consolidation going on in the server market that caused Tim Beyers to recommend that investors take the double the merger proposal offered and run with it. Even if the deal makes sense, there were still a number of hurdles that might be too high to clear. That was a prescient call.

CAPS member TSIF, however, is one of those expecting something to come of this eventually. He thinks the two sides are closer than might otherwise be assumed:

I'm betting caps points and real money that the issues with the IBM buyout will either be resolved or that there is another bidder sniffing around. Sun Management is not known for it's IQ, but they have seen what has happened to other floundering companies the last year or so who spurred a worthy suiter, (YAHOO!). The "rumor" indicates the deal was broken over $0.05. Now I know 5 cents is huge when you are talking millions of shares, but again, Sun Management's incompetence only goes so far. In the meantime, the market is up almost 20% since the offer was made. If the offer breaks off, then Sun should not be worth much less than the $6.50 I snagged it for.

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. There's more there than you think!

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