These 5 Underdogs Are No Dogs

Short-sellers and hedge funds may be shadowy, but sometimes they're also the smartest guys in the room. They've done their homework, and they're willing to bet their capital against the crowd -- an investing strategy that can be as lucrative as it is contrarian.

On Motley Fool CAPS, we've also got leading analysts who find the chinks in a company's armor and correctly call its fall. Our "Underdogs" have 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. Instead of studying more of their pessimistic picks, we'll focus on the stocks these top members expect will outperform the market. If these CAPS investors have scored big by correctly predicting which stocks will fail, it may be worth our while to see which others they think will succeed.

Not every short sale goes as planned, making shorting 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
Despite assurances from JA Solar's management that the industry's average selling prices will stabilize soon, those prices are down 50% year over year. Some analysts predict an additional 25% to 30% drop before prices hit bottom.

JA Solar, like Suntech Power (NYSE:STP) and Yingli Green Energy (NYSE:YGE), is a low-cost producer well-served by its positioning. But Hapoalim Securities thinks plenty of cloud cover remains for solar stocks. Hapoalim notes that JA Solar had to retract its first-quarter claim that there was a "high likelihood" it would ship some 400 megawatts of pipeline this year. JA Solar recorded a greater-than-50% drop in revenue, and a $2.06-per-share profit last year turned into a $1.21-per-share loss this time around.

Still, some potential for blue skies remains. China is launching a utility-scale solar project subsidy that could attract some $10 billion in private funding. The government would finance as much as 50% of the costs -- or as much as 70% in some rural areas. Other governments are also offering solar incentives. Coupled with the benefits from strong currency exchange rates, there could still be bright spots ahead for JA Solar.

First, however, it'll need to work out the oversupply in the solar panels market; analysts say the market might not reach equilibrium for another three years. That's a long time to wait for a sunny day, and a surprise management change at the top the other day adds to the uncertainty surrounding JA Solar's prospects.

CAPS members remain bullish on the solar company; 95% of those rating the firm believing it will outperform the market. A similar percentage of All-Star members also rate it to outperform. appleorangegreen thinks a better economy will mean better times for JA, while highly-rated All-Star Babachrono noted earlier this year it had a strong balance sheet, something which still exists today:

Good cash to debt, guidance today said will be in line with 09 predictions, 26% insider ownership, good solid company for a solar play as green energy will come back into focus.

There's no need to fear...
Underdogs often shine brightest with their backs 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.