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. However, we're going to 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.

Underdog

Member Rating

Company

CAPS Rating (out of 5)

melcherd

94.35

Chimera Investment (NYSE: CIM)

****

jimrausch

99.38

Dendreon (Nasdaq: DNDN)

**

MostlyChina

96.14

Las Vegas Sands (NYSE: LVS)

**

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
At last week's housing summit held by Treasury Secretary Tim Geithner, the secretary said that the administration would continue to meet its obligations to support Fannie Mae and Freddie Mac, while noting "the need to begin the process of weaning the markets away from government programs and make room for the private sector to get back into the business of providing mortgages." Whether this continued support of the lending agencies will be a blank check or not remains to be seen.

Mortgage REITS RAIT Financial Trust (NYSE: RAS), Annaly Capital (NYSE: NLY), and its scion Chimera Investment would certainly benefit from continued government support. Chimera invests primarily in "agency-backed" residential mortgage-backed securities. The full faith and credit of the taxpayer currently carries the risk of default making Chimera an easy investment to consider despite the troubled condition of housing.

CAPS member CPACAPitalist says not only do investors benefit from the government backing, but the REIT also pays out a "monster dividend" to boot, currently yielding 17.5%.

Annaly Capital's little brother has a low P/E, a monster dividend yield, and essentially a federally guaranteed product until policy changes. Good place to park some money for a while to grab some dividends and see what the market does.

A dose of reality
The long struggle to get Provenge to market has biotech Dendreon pushing the envelope on marketing the drug to gain as much mileage as possible from its efforts. When the FDA pushed back and said it was playing a little too fast and loose with the facts, investors apparently feared the rug was going to be pulled out from beneath them. But aside from having to reword their marketing materials, there's little to worry about here.

Of greater concern might be what Dendreon does as a follow-up act to Provenge. Without another drug candidate in advanced clinical trials it comes down to a two-prong test: do they buy their way to growth, acquiring drug candidates from other companies, or sell themselves to a Bristol-Myers Squibb (NYSE: BMY), GlaxoSmithKline (NYSE: GSK), or another pharmaceutical with significant experience in oncology and the resources to back it up?

Many CAPS members are rejecting that plan right now, preferring it reap the rewards of its work, at least for the time being. Sammy7g says the fruits of its labors will soon become apparent and bluoceanlover1 is awaiting the tsunami of growth that will accrue when Provenge hits the international scene: "Provenge will be huge when it hits international market which most likely will happen early Spring 2011."

Market disconnect
Gambling returned to Macau in a big way, with gross revenues in the Chinese casino oasis soaring 70% in July. Las Vegas Sands says the resurgence continued in August with gambling revenues rising 51% in just the first two weeks. The recovery is helping the casino operator improve its financial position as it pays down its debt and gets out from the grip of constricting debt covenants. There's a cost in higher rates, but it's a small price to pay.

CAPS member dtmcqt2 says Las Vegas Sands is coming up aces because it was able to read the cards ahead of everyone else.

LVS has shown a strong comeback. They are starting to reap the profits from the long term investment they made in Singapore. The company had the foresight to jump into a market that is just starting to reap in huge profits. Everyone now says China is the place to be coming out of the current depressed economic times. LVS was ahead of the pack and there is no reason it won't continue to be on the cutting edge.

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.

GlaxoSmithKline is a Motley Fool Global Gains choice. The Fool owns shares of Annaly Capital Management and GlaxoSmithKline. Try any of our Foolish newsletter services today, 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 here. The Motley Fool has a stress-free disclosure policy.