These Underdogs Are No Dogs

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.

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
Investors have appreciated Capstone Turbine's improving operations, particularly after the 22% increase in revenues it reported last quarter that hinted at growing future business prospects with a 41% jump in backlog. The maker of on-site microturbines that run off various fuel sources might even be able to see the results of that effort when it reports third quarter earnings on Monday.

While there will be a growing market for such mini-turbines, Capstone is looking to create a holistic business model and a recent agreement with a luxury hotel in the Dominican Republic builds on what it started last summer. Back then it entered into a partnership with CalMotors to redesign Parker Hannifin's industrial motor drive products for cars and trucks. Its newest agreement provides total plant operations over a nine-year period, valued at $1 million. It's a new opportunity to have a recurring stream of revenue.

Highly rated CAPS All-Star member MSUalum says it's all part of the same plan to not be reliant upon any one company or industry.

So here is the real growth story behind this company in my opinion; Capstone has been receiving orders from large oil and gas companies in the shale plays (which is going to be HUGE in the coming years). If they can keep this going, I see a bright future for this company.

Let us know on the Capstone Turbine's CAPS page whether the turbine maker will blow past analyst estimates.

Doubling down
As if the dry bulk shipping industry wasn't facing hard enough times already, Eagle Bulk Shipping got swamped by the news that one of its primary customers, Korea Line, was declaring bankruptcy. Eagle leased more than a quarter of all its vessels to the shipper and the news sent its shares plummeting 20%. Yet it wasn't alone in feeling the effects of the fallout as Navios Maritime (NYSE: NM) realizes an estimated 15% of its revenues from Korea Line.

The difference between Eagle and Navios, however, is the latter carries insurance that protects it from just such a calamity while it's said that Eagle had canceled its policy last year. Ouch.

CAPS member rofgile says that unless Korea is completely sunk then the sell-off is overdone because the rates it's paying are still locked in.

Recently, the share price took a big hit because Korea Line (a company that has contracts with 13 of EGLE's ships) declared that they need bankruptcy protection. However, most of these ships are at near market rates and unless Korea Line complete dead (which is not what is happening) they should continue to function with perhaps a small penalty to negociate a lower rate. That said, EGLE made a poor decision a year ago to drop their insurance against their customers defaulting-which would have really helped them now (for that feeling of safety).

Add Eagle to your watchlist and have all the Foolish news and analysis about it gathered in one place.

A well-dressed opportunity
You might have need your own pair of Depends adult diapers after soiling yourself following consumer products maker Kimberly Clark's disappointing earnings report last week. The diaper maker reported that while its largest product segments reported modest increases in revenues, its health care segment saw a 1.3% drop that resulted in a 53% decline in operating profits. Fortunately that segment only represents 7.5% of total revenues, so consolidated operating profits dropped less than 3%.

Still it highlights the competitive pressures Kimberly is facing from Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG). And even though personal care sales were up, profits were down there too as even, including Colgate-Palmolive (NYSE: CL), feel the impact of rising commodity costs.

Groovy99 likes Kimberly Clark's dividend, which is currently yielding 4.3%, and the CAPS community remains solidly behind the company with 94% of the more than 900 members rating it to outperform the market. You can depend on CAPS members adding further insights to the Kimberly Clark CAPS page in the future.

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.