7 Low-Rated Stocks That Soared

Successful investing requires you to think independently and stick to your convictions. That's hard enough with stocks that are generally popular -- after all, in the stock market, there's a seller for every buyer. But it gets even tougher with stocks that can't seem to find good press or bullish investors anywhere. Of course, defying popular opinion has led many contrarian investors to great returns.

In that spirit, I've headed to Motley Fool CAPS to dig up some unloved stocks that have delivered big gains to shareholders over the past month. Our community of investors has put each of these companies on the bottom two rungs of the CAPS rating scale:

Stock

30-Day Return

One-Year Return

Current CAPS Rating (out of 5)

H&R Block (NYSE: HRB  )

18.0%

5.8%

*

Halozyme Therapeutics (Nasdaq: HALO  )

15.4%

(22.7%)

**

Blockbuster (NYSE: BBI  )

15.3%

(47.1%)

*

Canadian Solar (Nasdaq: CSIQ  )

13.6%

126.2%

**

Tyson Foods (NYSE: TSN  )

13.5%

(12.5%)

**

Ryland Group (NYSE: RYL  )

11.6%

(28.7%)

*

The St. Joe Company (NYSE: JOE  )

11.0%

(20.3%)

*

Data from Motley Fool CAPS as of March 26.

Now, given CAPS' knack for accurately gauging winners and losers, I'm not recommending that you run out and buy these stocks! An index set up to short CAPS' least-liked stocks has outperformed nearly 96% of all other CAPS players. That said, CAPS players have proved overly negative on some high-performing stocks. Are any of the stocks in the table above the same sort of undercover rockets?

Providing the pep
What do you think of when I mention H&R Block? Tax preparation, right? Well, the company decided a few years ago that getting into the subprime mortgage business would be a good idea. Even if you haven't been following the recent trials and tribulations at H&R Block, you can probably figure out how that worked out for them.

Like most other players in the business, it wasn't until H&R Block had burned its hands significantly that it realized it was holding the hot potato. An attempted sale of Option One -- its subprime mortgage unit -- to Cerberus Capital Management fell through late last year, turning the company's headache into a throbbing migraine.

Earlier this month, however, H&R Block signed up a new deal with billionaire investor Wilbur Ross to offload Option One. Though the Cerberus deal showed that a deal isn't done until it's done, Ross has also recently agreed to buy servicing rights from American Home Mortgage. The two servicing portfolios combined would give Ross significant scale in the business, so it seems likely that he'll stick around to close the deal.

Sending the stock up further was the subsequent 2.4-million-share purchase by the company's chairman, Richard Breeden, as well as some positive comments from Standard & Poor's relating to the Option One sale.

Combing CAPS
H&R Block still faces a steep slope in its turnaround. Even after jettisoning the deadweight of Option One, it still faces tremendous competition in its core business.

On CAPS, the stock has been raided by the bears. Of 124 CAPS All-Stars -- those players ranked in the top 20% -- that have rated H&R Block, 91 of them have given it the thumbs-down. One of those All-Stars, abitarecatania, is concerned that the company is focused on the brick-and-mortar business while others have become more nimble online. He likewise noted that Warren Buffett's Berkshire Hathaway sold its position in the company, which is never a good sign.

On the bull side, fellow All-Star Merlinssecret said "the tax business is a slow growing cash cow" and expressed hope that the sale of Option One and the actions of Breeden -- who's an activist investor -- will revitalize the company.

So what's your take? Is there good reason to get more bullish on H&R Block right now, or is it going to continue heading down? Head on over to CAPS and let the community of more than 90,000 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 5,500-plus stocks on CAPS.

More CAPS Foolishness:

Berkshire Hathaway is a Stock Advisor and Inside Value selection. The Motley Fool owns shares of Berkshire Hathaway. You can check out any of the Fool's newsletters free for 30 days.

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.


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