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 -- 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.


Member Rating


CAPS Rating (out of 5)



Medivation (Nasdaq: MDVN)




Origin Agritech (Nasdaq: SEED)




Pacific Ethanol




Somaxon Pharmaceuticals




Telestone Technologies (Nasdaq: TSTC)


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
After the big sell-off following the failure of an Alzheimer's treatment in a Phase 3 trial, it seems few investors have the motivation to purchase biopharmaceutical Medivation. Although preliminary results had looked promising, and it had even signed on Pfizer (NYSE: PFE) as a partner, Medivation's dimebon produced radically different results in its Connection trial.

One CAPS All-Star willing to wade into the maelstrom is biotech favorite zzlangerhans, though he admits he's only looking at the short term.

I'm not including much value for Dimebon, which continues to be tested in three late-stage Alzheimer's trials and a Huntington's dementia trial. There's a substantial likelihood that Pfizer will terminate the partnership on Dimebon and send the share price on another leg downward, in which case I would consider it for a GBMB buy below 10. Because of that ongoing sword of Damocles, I wouldn't buy now or hold this green thumb past 14.

It's got the stones to succeed
Telecom equipment manufacturer Telestone Technologies has been shaking things up after announcing collaboration deals with China Mobile (NYSE: CHL) and China Telecom (NYSE: CHA) to supply 2G and 3G access coverage. Although the revelation of some accounting shenanigans by Fuqi International (Nasdaq: FUQI) reminds investors of the risks inherent in overseas investing, Telestone investors don't seem to worry about the contagion spreading (go ahead, I dare you to find a negative pitch about the company on CAPS). For instance, egobasher believes Telestone finds itself in the sweet spot of a huge market opportunity: "The possibilities out way the risk of a more advanced technology coming to market in the next year or so. They have built their business on the build out of G3 and they are right in the middle of the fastest growing Internet market in the world."

The germ of an idea
It doesn't take an accounting scandal to get investors riled up about Chinese seed maker Origin Agritech. Although two thirds of the CAPS members rating it believe it will ultimately outperform the market, its stock rating plummeted from a highly respected four-star level to the lowest one-star rating suggesting members think it's only a matter of time before the stock falls from its lofty perch.

CAPS All-Star TSIF admits he got caught with an underperform rating last year when it announced it received China's first approval for a genetically modified phytase corn seed, but he sees that as much ado about nothing.

What's not to like?
1. While it's title suggests hybrid seeds, it also deals in genetic. Try that on your average Chinese citizen and see where it goes. Especially after the Melamine scare in milk.

2. A double upcycle: The bagholders who bought between $10 and $15 last cycle are going to be a whole LOT LESS loyal after seeing the share price drop below $9. See how many ride this one as it crosses their purchase price.

Since then the short interest in the stock has done nothing but grow higher. Head to the Origin Agritech CAPS page and let us know if the seeds of doubt are likely to spread.

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.

Pfizer is a Motley Fool Inside Value pick. The Fool owns shares of China Mobile.

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 stress-free disclosure policy.