7 Surprising 1-Star Stocks

Surprises are part of the game when it comes to picking stocks. Sometimes this can mean bad news, like management from one of your top companies revealing that it has been posting anonymously to online message boards.

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 was given a one-star rating (the lowest) by our community of investors just 30 days ago:

Data provided by Motley Fool CAPS as of Aug. 8.

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 start you off with some thoughts on a few of these stocks.

The hazy Skyline
If you're scratching your head at the big move that Skyline made over the past month, you're likely not the only one. Unlike many public companies out there, Skyline --which makes manufactured housing and RVs -- is notably quiet. There are no company press releases to speak of, and SEC filings are quick and to the point. Investors used to 200-page filings with gobs of risk factors and legalese might be surprised at Skyline's 35-page 10-K annual report.

So despite the fact that the stock has risen 24% since Monday's close, there is precious little out there to help investors see why. Aside from the lack of company press or news coverage, the Yahoo! Finance discussion board for Skyline is a wasteland of spam postings, while the most recent posting on The Fool discussion board for Skyline is from 2001. In fact, the most recent outside coverage that directly addresses Skyline was a write-up on the manufactured housing sector by fellow Fool Emil Lee back in December. In that article, he singles out Skyline as a "class act."

At the end of July, the company filed an 8-K with the SEC disclosing fourth-quarter and year-end results. The upside of the report was that a relatively strong fourth quarter (ended in May) allowed the company to report a profitable fiscal year for 2007. This continues the company's streak of being profitable every year since its founding in 1951. However, thanks to continued weakness in the manufactured housing industry, as well as extra pressure from the housing downturn, 2007 numbers were pretty dismal. Sales dropped 35% and net earnings were off 56% from 2006.

At this point, my theory for the big stock move is that one of Skyline's institutional investors stepped in and wanted to buy some more. As of its most recent SEC filings, Third Avenue Management -- Marty Whitman's firm -- owns 11.4% of the company, and GAMCO Asset Management -- Mario Gabelli's firm -- owns 10.6%. T. Rowe Price, Dimensional Fund Advisors, Barclays, and Private Capital Management (an arm of Legg Mason) also own stakes of 5% or more.

Skyline is a relatively small company, so any large amount of buying could push up its price. In addition, a big price move could have shaken up Skyline short sellers and caused them to cover their position -- according to Yahoo! Finance, 11% of the float was shorted as of July 10.

There's also the outside chance that somebody caught wind of positive news that hasn't been announced yet.

On CAPS, a majority of the 23 investors who have rated the stock seem to be focused on the negative effect that the housing market will have on Skyline. While the few players who were early enough with this call have done OK, those who more recently gave it the underperform rating are sitting on a big loss.

So the question is: Will Skyline hold onto its gain? Or was this big move just an anomaly? 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 4,900-plus stocks on CAPS.

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.