These 5 Underdogs Are No Dogs

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 have our own brand of leading analysts who find the chinks in a company's armor and correctly call its fall. "Underdogs" are investors who have 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.

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 a platform for further research.

Underdogs still wag their tails
Solar stocks have been up lately, despite a cavalcade of poor earnings reports. Trina Solar (NYSE:TSL) was only one of the latest to report a loss (though adjusted profits beat expectations), following disappointing quarterly results by others like JA Solar (NASDAQ:JASO). Most striking, perhaps, was the significant writedowns in inventory at solar companies.

Many industry names, including ReneSola and LDK Solar, have had to write off significant sums of inventory. LDK Solar is writing off an additional $87.5 million worth while adding $12.3 million more to provide for doubtful recoveries, resulting in a restatement of fourth-quarter results. ReneSola took a $68 million charge.

With the rise in energy prices, though, it's natural that interest in alternative energy stocks like solar ones will perk up. Thus, despite lackluster results, shares in the sector have been on the move. LDK Solar is generating interest among investors just as it decided to build five manufacturing plants in Italy. It will provide the multicrystalline solar wafers that go into solar cells, while venture partner ESPE, an Italian systems integrator, will build the actual plants, with the first one already under construction.

CAPS All-Star 15PlusPercent finds that undertaking the manufacturing process itself, among other reasons, makes LDK Solar one good investment.

Building its own silicon wafer manufacturing plants with the first one online Fall 2009. China is providing incentives for alternate energy and solar is one "hot" [area] for investment.

CAPS member AbeMishima seems to concur in a pitch from March, noting that while the company could easily be written off, there are other forces behind it.

Once a darling at $75/sh, LDK [Solar] has fallen below $5/sh and seems to have no bottom. This is due mainly to inventory writedowns. If this were a US company, I would write it off as a stock. But being a solar company in China, you figure that the government will keep it afloat. Solar is "perceived" to be a critical new technology, and the Communists are not going to be short-sighted and allow one of the premier companies to go [bankrupt]. With that, here's my turn to roll the dice again. Hard eight, please.

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. 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.