Short-sellers and hedge funds, though sometimes shadowy, are sometimes seen as the smartest guys in the room. They do their homework and will bet their capital against the crowd. It's not the most popular way to go, but the rewards can be quite lucrative.

On Motley Fool CAPS, we've got our own brand of leading analysts who found the chinks in a company's armor and correctly called its fall. "Underdogs" are investors who earned 100 or more CAPS points 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. Yet, just as hedge fund operators don't always go short, we're going to look at recent Underdog picks no matter which way they've called them.


Member Rating


CAPS Rating (out of 5 max)




Herzfeld Caribbean Basin Fund (NASDAQ:CUBA)





United States Natural Gas Fund (NYSE:UNG)





PotashCorp (NYSE:POT)





Tortoise Energy Infrastructure (NYSE:TYG)





NYSE Euronext (NYSE:NYX)



Not every short sale goes as planned, so it's a risky position to hold. 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, but rather as the launching pad for further research.

Underdogs still wag their tails
I've never understood the embargo on Cuban trade and travel. We give China and Russia most-favored-nation trading status. The president gives Venezuelan strongman Hugo Chavez a street-style handshake. Heck, we even lifted sanctions against Libya. But there's a country roughly 100 miles from our shores with close cultural ties to many U.S. citizens, and we can't travel there or trade with them?

Obama has proposed easing travel restrictions so that family members may visit relatives, a meager but necessary first step in normalizing relations with the country. Naturally, investors consider ways they might be able to profit from an improved situation there, and the Herzfeld Caribbean Basin Fund soared on the news.

"Cuba", as it's known, is a closed-end fund. It invests in companies that would benefit from advancements made in the economic, political, structural, and technological conditions in the Caribbean Basin, including Cuba, Jamaica, the Dominican Republic, Mexico, Honduras, Panama, and Venezuela, among others.

For example, among its top holdings are Seaboard (NYSE:SEB), which provides containerized shipping services between the U.S. and the Caribbean Basin; cruise line Carnival (NYSE:CCL), which would benefit from increased tourism; and Copa Holdings, a passenger airline and cargo service to the Caribbean.

Unfortunately, as CAPS member TMFGalagan points out, Cuba has a history of rallying on such hopeful optimism only to fall back again. When Fidel Castro retired last year and turned the reins over to his brother Raul, Cuba shares soared as much as 29%, only to tumble back to earth. They got a boost again last month when Obama made his travel proposal.

Quite a number of CAPS members have actually weighed in on the prospects of Cuba's future, but less than a quarter of them think the fund will outperform the market. Indeed, less than 10% of the All-Star members who have rated the fund think it can beat the market going forward.

Still, cmgerace seems to think there's a sense of inevitability surrounding travel and trade with Cuba the island that will benefit Cuba the fund:

I think this fund will grow, as the area improves in the quality of life. Cuba, just part of this funds area, will lead the way when the US opens Cuba up to travel by US citizens. I have heard of one company in Florida that is ready to become a major car dealership organization in Cuba, when Cuba is open to US citizens. I am sure there are travel, banking, agriculture ([Terra Nitrogen] I hope ) companies, ready to pounce on the economy of Cuba to bring it into the 21st century.

There's no need to fear ...
When underdogs have their backs against the wall, that's when they can shine their brightest, but it takes more than a few All-Star picks and a quick paragraph to make buy or sell decisions. So, 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. There's more than you think.

NYSE Euronext is a Motley Fool Rule Breakers pick. Try any of our Foolish newsletters 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 disclosure policy.