These 5 Underdogs Are No Dogs

Short-sellers and hedge funds may be shadowy, but sometimes they're 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
Offshore oil and gas services provider Cal Dive International is able to attract adherents despite guiding analysts to lower profits due to fewer contracts, impacting utilization rates and vessel pricing. While parent Helix Energy Solutions (NYSE: HLX) divested most of its stake as it moved itself toward a pure contract services business, CAPS member totallyoblivious believes this is just the right time to be getting into Cal Dive:

Factor in that it's forecast to be a more active than normal hurricane season in the Gulf this Summer, and you can pretty much guarantee that the offshore drilling platforms are going to need some repair work done. This is the best bang for your buck you'll find right now

Dialing up demand
Similar to Ciena's (Nasdaq: CIEN) having to rely upon its telecom customers to purchase more of its equipment to meet the capacity needs of end users, Brocade Communications is suffering from an industrywide sequential 26% drop in ethernet sales. For instance, distribution partner Dell (Nasdaq: DELL) took a go-slow approach last quarter. But Brocade isn't a bust, and CAPS All-Star TSIF says the right product mix will put it back on track:

The external network is growing, but Brocade does not seem to have the right mix of products to take full advantage of the expansion. Margins and revenue are up and cash is strong, although part of the cash increase is from new borrowing and additional stock issues. While I would rather see stronger product growth and more institutional investing, it appears to me that the share price of Brocade has fallen below reasonable valuations metrics, (no active buyout rumor or not), but it needs to get some cutting edge products from it's large R&D outlay.

Not just fool's gold
Some of the world's top hedge fund investors have been dumping money into the speculative NovaGold Resources (NYSE: NG), leading some analysts to question if it's not the height of folly. But NovaGold and Teck Resources jointly own the promising Galore Creek project in British Columbia, which has been idled for two years. But maybe that makes Teck the better bet, since along with the rest of its assets, it is entitled to half the profits to be realized related to the copper, silver, and gold still residing underground there.

CAPS member DarthMaul09 views Teck as a long-term winner, and he's not alone as 96% of the nearly 1,300 members who have rated the miner think it will outperform the broad market averages.

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.