Low-Profile Stocks for High Returns

Like the song says, investors are looking for stocks to love in all the wrong places. They'll pile into the momentum stocks everyone else buys, but ignore lesser-known opportunities for fear of straying from the crowd.

Yet the search for undiscovered jewels has informed many of our Motley Fool Hidden Gems picks, from Under Armour to Vail Resorts. Overlooked by Wall Street and Main Street, and thus potentially undervalued, these stocks hold the best potential to deliver outsized returns.

The Motley Fool CAPS community knows a bargain when it sees one. Below, you'll find several under-the-radar stocks that brim with promise. These companies have garnered less than 100 active recommendations on CAPS, despite double-digit growth in earnings over the past three years.

Source: Motley Fool CAPS.

Naturally, we want you to look a bit closer at these stocks before buying. Maybe investors are staying away from these stocks for a reason so make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.

Under the radar
When you look at the Oasis of the Seas cruise ship operated by Royal Caribbean (NYSE: RCL) you understand the mammoth proportions of this Leviathan. Soaring 20 stories over the ocean (that's like the Flat Iron Building in New York City), it has seven "neighborhoods" and features 2,700 staterooms accommodating 5,400 passengers. There's a 750-seat outdoor amphitheater and a 1,300-seat indoor theater too. The audacity of it all instantly conjures the word "Titanic" in your mind.

Carnival's ships are no dinghies by comparison. It's the world's largest cruise line with a fleet of 88 ships accommodating an average of more than 1,900 passengers each. Whether they're big or just normal size, filling these ships has proven to be a challenge as high fuel costs have eaten into margins. But while Carnival saw a 2% decline in net revenue yields on a constant currency basis last quarter, it was still better than management's expectations of a 4% drop.

Investors, though, have this sinking feeling when it comes to the cruise line outperforming the market. Only 69% of CAPS members rating Carnival think it will beat the broader market averages while 80% see Royal Caribbean sailing ahead. Why not drop anchor on the Carnival CAPS page and tell us whether the Fun Ship operator will be hitting some stormy seas.

A case of idolatry
Despite the success and popularity of American Idol, entertainment content company CKX hasn't had investors idolizing its performance lately. It posted a first quarter loss mostly from lower revenues and restructuring costs. Its CEO and founder Robert F.X. Sillerman recently resigned and is contemplating buying the company, but even that wasn't enough to bolster a lackluster stock. Shares are off 15% year to date, but are down nearly 29% over the past month and management has confirmed its actively looking for a buyer, possibly to the private equity arm of JPMorgan Chase.

Highly rated CAPS All-Star kevinottofro votes for CKX to still turn in an Idol-worthy performance later this year and find its depressed valuation an opportunity: "Low relative PE, good star & 2010 earnings. Bottom fishing week of 5/10"

That's just nutty
The careful, timed delivery of drugs was behind the technology developed by French nanotech specialist Flamel Technologies, whose nano particles would allow for a drug's controlled release. Yet there are many ways of controlling the flow of drugs, and BioSphere Medical (Nasdaq: BSMD) has successfully developed a microsphere technology to precisely deliver drugs or reduce blood flow to certain areas, like at tumor sites.

Medical device maker Merit Medical Systems thought enough of it to buy the whole company, with the deal valued at $96 million. That might help bolster a portfolio of products that saw a 16% increase in revenues over the last two quarters, but which also led to an 18% drop in earnings as they offered lower margins.

With 94% of the CAPS member rating the device maker to outperform the market, they seem to believe it will be able to precisely deliver earnings growth in the future.

Keep a high profile
Sign up today for the completely free Motley Fool CAPS service, and tell us whether these low profile stocks are on their way to higher returns. There you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.