By Rich Duprey
August 5, 2009

Short-sellers and hedge funds, though sometimes shadowy, are also sometimes seen as the smartest guys in the room. They did 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 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 focus on the picks these top members are looking to outperform the market. If they’ve been making their points being bearish on stocks, it may be worth our while to see which ones they think will succeed.

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
There’s just so much to not like about the pact Yahoo! signed with Microsoft (Nasdaq: MSFT) that you get the impression Yahoo! was still the smitten suitor swooning when the object of his desire shows anything other than apathetic glances toward it. The Fool’s Rick Munarriz clearly outlined why investors gagged on the deal that sent Yahoo!’s shares sharply lower.

As CAPS member PaloAltanFool further illuminated, the agreement seems to benefit Microsoft more than it does Yahoo!, neither of which will make any inroads into Google‘s (Nasdaq: GOOG) market share.

The recent deal with Microsoft is a funny thing. It was supposed to benefit Yahoo!, but the deal announced recently seems to do anything but. Having Bing power searches and giving control of ads to Microsoft spells double-trouble for Yahoo. As for helping compete against Google? Fat chance. I’d rather use Google than a Microsoft-controlled puppet of a Yahoo.

But there might be reasons for Yahoo! to ultimately win in the long run. While the bear case says Yahoo! is giving up on search and turning the process over to Microsoft, surrendering the search function means the top web destination gets to save millions in costs — yet still receive 88% of the ad revenue. Moreover, if Bing fails to live up to its hype and doesn’t deliver the goods, Yahoo! can walk away from the deal. Although Microsoft added an escape hatch for itself with an option to end Yahoo!’s exclusivity with large advertisers after five years, the portal then gets to keep 93% of the revenues from the ads running on its pages.

Sure this probably means that Microsoft buying Yahoo! outright is dead in the water for the time being, but Yahoo! might still get the chance to become a bride. Having a relationship means they’ll get to grow more comfortable with each other, kind of like living with your girlfriend for awhile before asking her to marry you.

No fleas here
If you want to invest in gold miner Nevsun Resources, then you can’t discount the risks of mining in Eritrea where its Bisha mine is located. The war-torn country is no joke, but after buying its way into a 30% ownership stake in the project, the government has apparently been a pretty stand up partner. Whether its permitting or securing loans, the Eritreans have seemingly lived up to their end of the bargain. Even in its latest round of debt financing, the government has backed Nevsun’s efforts.

With an estimated one million ounces of gold, nine million ounces of silver, 747 million pounds of copper, and one billion pounds of zinc, Bisha could be one of the largest undeveloped gold and base metal deposits in Africa. CAPS member sempire is eyeing those deposits and figures Nevsun makes either a ton of money off the venture or becomes an acquisition target.

NevSun is a cheap stock sitting on some good cash, and very good projects. Two things usually happen to a stock like this. It becomes big, or it gets bought out. We will have to wait and see. I am up over 200% on it so far. Definitely a keeper.

Nevsun’s shares have jumped 44% over the past month outperforming the CAPS Metals & Mining sector where the average stock has only climbed 19% over the same time period.

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.