These 5 Underdogs Are No Dogs

Short-sellers and hedge funds may be shadowy, but sometimes they are the smartest ones 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 also have investors 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 members expect will outperform the market. If these 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
Consumers' shift to private-label products has taken a toll on name-brand product makers like Procter & Gamble. Cereal maker Kellogg (NYSE:K), for instance, is worried that consumers will continue to expect price cuts on products, leading to "profitless prosperity" for manufacturers who engage in discounting to drive up volumes.

While Procter & Gamble has generated almost $80 billion in sales and $13 billion in net income over the past four quarters, it's still looking to new markets and lines of business to help expand sales. For example, it opened a Mr. Clean-branded car wash as an experiment in 2007 and will roll out the concept nationwide. It acquired a chain of car washes last year to help expand the chain.

CAPS member USAFbrat notes that Procter & Gamble is so enmeshed in our daily lives that it will profit regardless. "No matter what the economy, people buy shampoo and toothpaste," he says. "Plus PG pays dividends."

But BarneyBrown thinks its strategy of maintaining a premium price level will be its downfall:

P&G seems to have as its objective to move its customers up to its premium products and then to make those products even more premium. I think that P&G has succeeded but that it's reached the top in some of its products and will see slower growth. Example: How can it be any more successful than it has been with its Gillette razors? (I'd pay 4 times as much for a Gillette razor than for any of its dull, rip-off competitors--it's that good!) P&G would need to make a huge number of successful acquisitions of top labels and then successfully upgrade and sell more of them in the market at higher prices. This strategy will not work as well as it did 10 years ago. 

Show me more
Copper and gold miner Taseko Mines sold off with the rest of the market, as CAPS member DarthMaul09 notes, but its shares have more than quadrupled over the past year. And last month, the company may have hit the big time when its Prosperity mine gained all-important environmental permits from the Canadian government.

The Fool's metals guru Christopher Barker thinks Taseko's low-cost profile puts it on the same level as Yamana Gold (NYSE:AUY), and Taseko has about 7.7 million ounces of recoverable gold in reserve, in addition to loads of copper.

DarthMaul09 is looking forward to milking this "cash cow for years to come," while chico237 thinks the market is ignoring the Prosperity mine's potential:

Copper will continue to range between $2 & 3$per share & Gold between 800$& 1,100$respectively. The market has not priced in the net worth of the PROSPERITY mine. I estimate total future stock price target of $8.

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. 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.