7 Surprising 1-Star Stocks

Surprises are part of the game when it comes to picking stocks. Sometimes, this can mean bad news -- like one of your top stocks revealing that management has been backdating options.

Other times, though, the market gets caught off-guard by positive surprises from stocks that most investors thought were down for the count. In this situation, investors who stood by the stock often break into a chorus of "I told you so," while short-sellers are forced to figure out just how much pain they can take.

To dig up some of the unloved stocks that have been defying naysayers, I'm turning once again to Motley Fool CAPS. Each of the companies below had been given a one-star rating (the lowest) by our community of investors just 30 days ago:

It's important to remember that some of these stocks, particularly the smaller, more volatile ones, could just as easily reverse these big gains over the next 30 days. In some cases, though, the strength could be a sign that the company's prospects have changed for the better, or that it had been beaten down just a little too far.

Here's the question with these stocks: Are they better than CAPS players had thought, or just singing that proverbial swan song? The best way to get a feel for where these guys are headed is to dig in and do some research. I thought I'd kick you off with some thoughts on InterOil.

Pumping Papua
It's hard for me to overlook a stock that just seems to keep showing up on this list. Following an initial appearance last November, when the stock had gained 51% in a month, and a follow-up in April, when it was up 35% over a 30-day period, InterOil joins us again. This time, it's up 29% over the past month, having now more doubled over the past year.

If you take the time to read the company's SEC filings and press releases, you can see that the company has plenty going on. Still, I couldn't help noting this line from its 2006 40-F filing: "InterOil does not have any reserves and does not have any oil or gas production or related future net revenue."

The company has a number of licenses that allow for exploration on about 8 million acres of Papua New Guinea. Unfortunately, until the company can actually produce some oil or gas of its own, it will continue to generate its revenue from its very low-margin refining, marketing, and distribution business segments.

Though the company is sanguine on its prospects for a find, CAPS players are decidedly pessimistic. Among top-ranked CAPS players giving InterOil the thumbs down, CAPS' top dog, TMFEldrehad, says:

This is a pretty binary proposition. Either they strike oil, or they don't. Given their past track record, I'm betting on 'don't.'

Another highly rated CAPS player, capitalist101, adds, "The catalyst for the stock drop will be a forced capital raising this year as they are running out of cash."

Do you think that InterOil is poised to surrender its gains? Or will it continue its upward march? Head over to CAPS and let the community know what you think. While you're there, you can start your research on any of the other stocks listed above, or any of the 4,500-plus stocks on CAPS.

More CAPS Foolishness:

• 5 More Stocks Under Attack
• 7 Highly Rated Stocks on Sale
• 3 All-Star Stocks on Fire

Fool contributor Matt Koppenheffer didn't see these particular moves coming, but he's rarely surprised at Mr. Market's general tomfoolery. You can check out Matt's CAPS portfolio here, or visit his blog. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is never going to give you up, it's never going to let you down, and it's definitely never going to run around and desert you.