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.


Member Rating


CAPS Rating
(out of 5)



International Coal (NYSE: ICO)




Oclaro (Nasdaq: OCLR)




RadioShack (NYSE: RSH)


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
Even though International Coal has more than doubled over the past six months and is up 50% in the past three months alone, there's still plenty of room for more growth. Oil companies can't drill, Japan's nuclear debacle has sharpened the focus of fears over the supposedly "clean energy," and alternative sources like wind and solar have yet to find any critical mass. Considering its abundance, coal may get another round of support as keeping us on the road to energy independence.

Freight rail operator CSX says it will be coal that keeps "energy affordable, promote energy independence and support jobs." Railroad carload volume rose at least 5% over the first three months so far industry wide, and Union Pacific (NYSE: UNP) said growth would have been even better had not poor weather interfered, and Norfolk Southern is expecting a solid 2011 as well.

CAPS member Isaacroccoco looks to coal companies like International Coal to be the beneficiary of Japan's problems: "Got into it before Japan disaster. It's looking better now that nuclear energy will have a PR problem."

The overwhelming majority of CAPS All-Stars no doubt agree as 98% of those rating the coal miner believe it will go on to outperform the broad market averages. You can add International Coal to your watchlist and see if it can cleanly burn its way to the top.

A well-dressed opportunity
The weak forecasts by Finisar and Ciena (Nasdaq: CIEN) have taken down their stocks along with others in the sector, including Oclaro. Shares of each of the optical networking stars have fallen hard over the past month but Oclaro is down just 14% compared to 40% for Finisar and 32% for JDS Uniphase. Ciena is off just 5%, underscoring this historically volatile segment.

Even in the face of their performance, the optical networking sector is hot. Or will be. AT&T, Verizon, and other telecoms are going to have to deal with the increasing growth mobile computing is enjoying and upgrade their systems.

Wall Street analysts remain upbeat about Oclaro's prospects and the CAPS community is solidly behind it as well. Let us know on the Oclaro CAPS page whether you think it's offering investors an even risk-reward exchange.

All aboard!
As dismal as Best Buy's (NYSE: BBY) fourth-quarter earnings report was yesterday, it still looks to be in better shape than rival RadioShack, which is scrambling to remake the company from a bricks-and-mortar-facing business to one stressing kiosks. Maybe they'd like to talk to Blockbuster about that. It's transitioning away from kiosks in Sam's Clubs to ones that will appear in Target (NYSE: TGT), but in the process will decimate gross margins. Target kiosks generate margins of just 4% compared to 12% at Sam's Club.

Cell phone sales have been one of the Shack's bright spots, and has been one of the areas helping Best Buy not completely implode, too. But it hasn't come to terms with Verizon yet for selling its phones and the revenues it enjoyed from selling iPhones from AT&T is likely to be compromised now that the carrier no longer has an exclusive arrangement with Apple.

CAPS member A6EIntruder blasts RadioShack for losing relevance with most electronics consumers.

I can't imagine how Radio Shack could be relevant to anyone. Its one advantage is the small store footprint, but how many cell phones in a near-saturated NA market do you have to sell before you're profitable? Honestly, selling cell phones out of those carts in the mall might be more lucrative.

Can the electronics miscellany purveyor become a relevant force again? Add RadioShack to the Fool's free portfolio tracker and keep tabs on how long before it is reduced to just pushcarts in the mall.

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.

Best Buy is a Motley Fool Inside Value pick. Apple and Best Buy are Motley Fool Stock Advisor recommendations. The Fool has written puts on Apple. Motley Fool Options has recommended a bull call spread position on Apple. The Fool owns shares of Apple, Best Buy, and RadioShack. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey owns shares of Best Buy but 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.