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
Compared with the rest of the retail sector, sales of electronics have been disappointing, and we didn't need the numbers from big-box retailers to see that. Retail sales surged 1.2% in November from the month before, excluding auto sales, with eight of 13 categories advancing. While electronics declined sequentially, it was only up a rather weak 0.9% from the year-ago period. In comparison, sporting goods rose more than 12%, and clothing was up almost 8%.

Consumers have been looking for bargains, and high-end 3-D and Internet TVs apparently weren't part of the mix. And while smartphones have been a leading growth opportunity, RadioShack is suffering from declining margins as its customers have increasingly shifted to lower-end handsets. Meanwhile, it faces pressures from larger rival Wal-Mart (NYSE: WMT), which has been pushing the value proposition of its mobile offerings (I switched over to their Family Mobile plan and love it).

Yet just as when flatscreen TVs became all the rage and you could even buy one at Home Depot, everyone wants to be a mobile phone reseller. Wal-Mart's just one entrant into the field, even Target (NYSE: TGT) is setting up kiosks in their stores. That has some analysts questioning whether it's time to sell RadioShack stock, and CAPS member Hassjo says the electronics retailer reminds him of bankrupt Circuit City:

Seems like a smaller version of Circuit City. The latest 10-K shows sales increases driven only by cell phone sales ( 25.8%) very aggressive competition in that space. A slow holiday season will also impact the stock repurchase program ultimately leading to a lower share price.-Long Term Underperform

Let us know on the RadioShack CAPS page or in the comments section below whether there's still a growth story here or if it will short circuit completely.

In the checkout line?
As much as supermarkets are seen as recession-resistant, the bankruptcy of the A&P chain shows they're not recession-proof. SUPERVALU has been also struggling to keep up with rivals like Kroger (NYSE: KR) and Safeway (NYSE: SWY), all of which are feeling the pinch of consumers balancing value with price.

SUPERVALU's decision to go with higher-margin items didn't sit well with shoppers, who've abandoned the store in droves. The discount grocery chain remains a favorite of CAPS members like mat05 who are still counting on a turnaround. A high 92% of those rating SUPERVALU think it will outperform the market, but only you can decide if it belongs in your basket of stocks. Add the grocer to your watchlist and have all the Foolish news and analysis about this stock aggregated for you in one place.

A well-dressed opportunity
CAPS members are looking for medical dressings maker Winner Medical Group to stem the flow of investor bleeding in Chinese small-cap stocks. The stock is up 20% over the past month, and 96% of All-Star CAPS members think it will outperform the broad market averages.

Sales and profits rose in the fourth quarter, even as rising raw materials costs for basic items like cotton affected operations, because it was able to raise prices. The company continues to believe that a combination of domestic and international sales will help it achieve the 20% to 30% revenue growth it's looking to achieve. Winner ended its fiscal year up 17% in 2010 as sales in the western hemisphere grew more than 30%.

Add the gauze maker to the Fool's free portfolio tracker and then head over to the Winner Medical Group CAPS page and give us your thoughts on whether it can wrap up the competition.

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.