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 out into a chorus of "I told you so," as short sellers are forced to figure out just how much pain they can take.

To dig up some of these unloved stocks that have been defying naysayers, I'm turning once again to The Motley Fool's CAPS community. 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 prospects for the company have changed for the better, or that it had been beaten down just a little too far.

So the question with these stocks is: Are they better than CAPS players had thought, or are they 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 InnerWorkings.

InnerWorkings' innards
Though the company has only been public since last summer, shareholders of InnerWorkings have already had an interesting ride. After the IPO in August, the stock was up as much as 74% by the end of the year. An article in Barron's at the beginning of 2007, though, took a buzz saw to the company, attacking its business, technology, and connections to supposed huckster Eric P. Lefkofsky.

After falling 39% to a low of $11.08 in March, the stock has bounced back and is now trading well above the IPO price. While the Barron's article itself may now be old news, its accusations have not necessarily expired -- they've more likely been forgotten, like most financial markets news that's more than a few days old.

The article cites Lefkofsky's checkered past of hyping technological solutions to traditional brick-and-mortar businesses, leaving investors holding the bag when expectations failed to materialize. The article also balks at the price investors were willing to pay for a company that it claimed is a "mundane print brokerage business."

The company did issue a response to the article, though it is strangely hard to find now except from secondary sources. In the response, the company rebutted the accusations in the article, asserting that Lefkofsky "does not have any decision-making authority or responsibility for any management function."

Perhaps providing some comfort is the fact that the well-respected venture capital firm New Enterprise Associates -- which names Caremark (NYSE: CVS), Juniper Networks (Nasdaq: JNPR), WebEx (Nasdaq: WEBX), and TiVo (Nasdaq: TIVO) as past portfolio companies -- was an investor in the company prior to its IPO. NEA managing general partner Peter Barris currently sits on InnerWorkings' board. Perhaps ominously, though, Barris' other current public company board seat is the notorious Vonage Holdings (NYSE: VG).

Noted concerns aside, the company has managed to produce some good-looking results so far. Between 2002 and 2006, it has put up a compounded revenue growth rate of 138%, and its net income margin has increased from 4.1% in 2003 to 5.1% in 2006.

On CAPS, 43 of the 60 players who have rated InnerWorkings have given it a thumbs-up, though more than half of the CAPS All-Star players who have rated the stock have put up the red light. The InnerWorkings bears have been quiet in terms of comments, but WSMOOT19, a bull on the stock, has cited it as "a great takeover candidate."

So do you think that Barron's was right and this stock is destined for the Dumpster? Or will it continue to put up strong growth and defy the critics? 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 4,600-plus stocks on CAPS.

More CAPS Foolishness:

• 5 Stocks That Made Big Moves
• 7 Highly Rated Stocks on Sale
• 3 All-Star Stocks on Fire

TiVo is a Motley Fool Stock Advisor pick. You can find out why, and see all current and past selections of our flagship newsletter, with a 30-day free trial.

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.