7 Surprising 1-Star Stocks

Part of being a successful investor is being able to think independently and having a strong enough conviction to stick with your ideas. This can be a difficult enough task when you're looking at a stock that the media and analysts generally like -- after all, in the stock market, there's a seller for every buyer -- but it becomes a far thornier proposition when you're looking at a stock that can't seem to find good press or bullish investors anywhere.

Of course, going against popular opinion has also led to great returns for many contrarian investors.

In that spirit, I've headed to the Motley Fool CAPS community to dig up some unloved stocks that have delivered big gains to shareholders over the past month. Our community of investors had given each of these companies a one-star rating -- the lowest possible -- just 30 days ago:

Now, I'm not recommending that you run out and buy these stocks! Their low ratings are a big, flashing red light. CAPS players have been pretty adept at picking out good stocks, and even better at pointing out bad stocks to avoid. In fact, an index set up to short the least-liked stocks in CAPS has outperformed nearly 96% of all other CAPS players.

In other words, most stocks that are rated with one star in CAPS are likely to underperform. However, CAPS players aren't perfect. They've been overly negative on stocks such as Crocs and DryShips, both of which have delivered seriously impressive returns to their investors. So the question is whether any of the stocks in that table might be one of those undercover rockets.

Do research? You're kidding!
That's right, the best way to figure out whether any of these stocks is worth considering for your portfolio (real or CAPS) is to roll up those sleeves and dig in a bit. What we're looking for here are stocks that have good fundamentals despite the lack of popularity -- a profitable business, good management, and some decent growth prospects.

So with that said, you're going to have a tough time finding me hanging around XM Satellite stock, particularly when the movements are based on speculation over whether the DOJ will approve its tie-up with Sirius  (NASDAQ:SIRI). I'm also still very gun-shy on the homebuilding industry, so Ryland isn't for me, either. And, finally, though I'm all for greener energy, I'm very skeptical of what ethanol can deliver, so Verasun is out for me, too.

But what about Optium? The company makes optical subsystems for the fast-growing optical communications market, and its stock rocketed up to more than twice its current valuation after going public this time last year. Since then, some early disappointments appear to have reduced investor optimism, and the stock has fallen 56% from its high for the year.

There appears to be a bit more life in it now, though. Though its fiscal fourth quarter was disappointing, management projected strong sequential revenue growth of 27% to 31%. At the end of last month, some Wall Street analysts were also getting positive on the stock. And, of course, CAPS players have gotten much more positive on the stock, boosting it from a single star to its current three-star rating.

CAPS All-Star samurthy had this to say about Optium:

With the upcoming fiber shortage due to accelerated growth in bandwidth hungry [applications], carriers will invest in network upgrades. Optium, with [its] WSS ROADM, 40GB / 10GB product line, [will] get a share of the pie.

So what's your take on Optium? Head over to CAPS and let the community of more than 70,000 Fools 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 5,000-plus stocks on CAPS.

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