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

On Motley Fool CAPS, we also have members 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 to 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 other ones they think will succeed.

Underdog

Member Rating

Company

CAPS Rating (out of 5)

AirForceFool

99.94

Bio-Reference Laboratories (NASDAQ:BRLI)

*****

oldvolvoguy

99.44

GigaMedia (NASDAQ:GIGM)

*****

techvalu

98.04

OmniVision Technologies (NASDAQ:OVTI)

***

PIGMA

96.81

Valero (NASDAQ:VLO)

*****

philrayc

93.01

ConocoPhillips (NYSE:COP)

*****

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
Seems there was a good reason why Taiwan-based gaming house GigaMedia didn't report earnings for two quarters: It was rolling craps. It went from being a profit-making enterprise with online poker operations and interesting Asian games to one that is now posting losses. Competition with NetEase.com (NASDAQ:NTES) and Shanda Interactive (NASDAQ:SNDA) has grown more challenging, and unlike rivals who are bringing new releases to gamers, GigaMedia doesn't have anything new to offer in the fourth quarter. It's forecasting a decline in fourth-quarter revenues as a result.

With shares hitting new 52-week lows regularly, it's surprising to see 98% of CAPS members who rate the company still believing it will outperform the market. Yet as Momentum21 recently wrote, supporting the stock at these levels is a chance to move in without it amounting to catching a falling knife:

I had recently started following this one and have a love/hate with online gaming. Low barriers to entry makes it intensely competitive and during tough times the prospects are dicey at best.

That said I think I need a piece of this industry and will roll my dice that today was a bit of an overreaction to some bad earnings. A bit of a risk of course but I just pulled the trigger on some at 3.47. Probably should have asked first and fired second but if I liked it at 4.15...then better at 3.47, right? : )

Through the looking glass
Turmoil in the Middle East is causing oil prices to rise once again, running as high as $79 a barrel, but with weak demand for gasoline, heating oil, and even jet fuel, oil refineries continue to reduce production capacity. Reports due out today and tomorrow will indicate which way inventories are turning.

Valero is just one of a number of refiners that either indefinitely suspended operations at plants or have closed them altogether. CAPS member sheltonclan isn't concerned about the action, though:

The management of VLO knows when to fish, and when to cut bait. The closing of the [Delaware] refinery shows they are not afraid to work hard and invest in a location...and it also shows they know when to move on. Looking over the management decisions for the past few years, I have confidence that VLO will be making the right calls to take advantage of the increased pressure for increased production that we will see in the US in the next few years.

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.

NetEase.com and Shanda Interactive Entertainment are Motley Fool Rule Breakers picks. Bio-Reference Laboratories is a Motley Fool Hidden Gems recommendation. Try any of our Foolish newsletter services free for 30 days.

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