Short-sellers and hedge funds, though sometimes shadowy, are often seen as the smartest guys in the room. Having done their homework, they're willing to bet their capital against the crowd. It's not the most popular strategy to pursue, but the rewards can be quite lucrative.

On Motley Fool CAPS, we've got our own brand of leading analysts, each of whom found the chinks in a company's armor and correctly called its fall. "Underdogs" are investors who earned 100 or more CAPS points by correctly predicting that a stock would underperform the market.

Let's look at some of the recent calls these All-Star investors have made. Just as hedge fund operators don't always go short, we'll look at recent Underdog picks on both the short and long sides.

Underdog

Member Rating

Company

CAPS Rating (out of 5)

Call

chk999

100.00

Corning (NYSE:GLW)

*****

Outperform

TheGreatSatan

99.99

Washington Mutual (NYSE:WM)

*

Underperform

StatsGeek

99.99

Transocean (NYSE:RIG)

*****

Outperform

EverydayInvestor

99.99

Berkshire Hathaway (NYSE:BRK-A)

*****

Outperform

JohnnyLC

99.97

Chesapeake Energy (NYSE:CHK)

*****

Outperform

Not every short sale goes as planned, making shorting stocks a risky approach. Stock prices can be irrational longer than you have money to stay in the game. Don't use this as a list of stocks to sell or buy -- just the launching pad for your own further research.

A stinging rebuke
So far this year, shares of Berkshire Hathaway have lagged the market; with almost 30% of Warren Buffett's holdings in financial stocks, this might not be surprising. While one Foolish colleague has suggested that the Berkshire annual meeting may have "jumped the shark," the same can't be said for the company. Pull back that share price lens a little further, and over the preceding 12 months, Berkshire beats the market.

That said, is Buffett making mistakes these days? It's hard to question the judgment of the world's greatest investor, but he reduced his stake in Western Union (NYSE:WU) just as it was taking off, and while the financials may turn around one day, having such a large concentration may be holding the portfolio back. Of course, buying when all seems bleakest -- or as Buffett himself likes to say, "being greedy when others are fearful" -- has been a superb strategy thus far.

That approach might be worth applying to Berkshire Hathaway itself. Top-rated CAPS All-Star member TMFMattyA seems to think so: "Nothing more needs to be said. The best company in the world, managed by the greatest investor and CEO of his time, is finally on sale."

Feeling gaseous
Despite some record runs in the sector, are Chesapeake Energy and other natural gas plays like XTO Energy (NYSE:XTO) poised for a period of underperformance? Oil prices are moderating, much to the relief of drivers everywhere, and that may spark a similar decline in natural gas prices. Moreover, with plenty of new reserves coming to market -- Barnett, Marcellus, Bakken -- the industry may experience a gas glut that could depress prices further.

CAPS investors like minnesotaguy couldn't disagree more, arguing that demand will keep pushing prices higher:

Chesapeake Energy is positioned to benefit nicely from future price increases because of demand. Chesapeake has invested in the acquisition of new oil and natural gas reserves. [Chesapeake] owns its own drilling rigs allowing it keep drilling costs down and to move rapidly in exploiting its reserves. Sold property to pay off debt and invest in biggest gas field (TBD). Energy analysts predict oil and natural production to increase 20% in 2008. This is a big plus for the company. If Pickens gets his way, 20% of cars will be running on Natural Gas vs oil. He says take gas out of power plants but I suspect that will not happen.

There's no need to fear...
Underdogs shine brightest when their backs are against the wall, and it pays to start your research on these stocks on Motley Fool CAPS. Read a company's financial statements, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Then don your superhero cape and go rate the stock; your opinion can still save the day.

Western Union, Chesapeake Energy, and Berkshire's Class B shares are Inside Value recommendations. Berkshire's Class B stock is also a Stock Advisor pick. The Fool owns shares of Berkshire Hathaway. 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.