Hidden 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 Autoliv to Nuance Communications. Overlooked by Wall Street and Main Street, and thus 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 100 or less active recommendations on CAPS, though the community thinks they still have outsized potential.

Source: Yahoo! Finance, 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. Make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.

Under the radar
Does China face the same situation the U.S. housing market found itself in before its collapse, or are we witnessing the rebirth of the Chinese economy after a mild setback? The data would seem to lean precipitously toward the former conclusion, since property values in many cities are in freefall.

According to some estimates, house prices in Shanghai plummeted 48% week-on-week. In one district, the bottom simply fell out, as prices dropped 94%. China Daily says Beijing property developers are cutting prices, too, in hopes of spurring demand following the government's tighter control on real estate. Heck, things are even that bad here. Although the industry is pretty much dead everywhere, the Case-Shiller index showed that only Las Vegas actually declined in value in May.

If that's truly the case, then real estate service providers such as E-House and China Real Estate Info have to be concerned, not to mention developers such as Xinyuan Real Estate (NYSE: XIN).

CAPS member Clint35 still expects the growing Chinese middle class to grow China Real Estate Info in the future. Apparently, so do 93% of the CAPS members who've rated the data provider.

Rev those engines
Natural-resources exploration company U.S. Energy is seeking to capitalize on the boom in commodities. Although its partnership with Brigham Exploration (Nasdaq: BEXP) for oil and gas in the Williston Basin might be of more immediate importance, its rich vein of molybdenum in Colorado could generate some serious longer-term returns.

Molybdenum prices are trending lower, and General Moly says that hurt performance this quarter. Back in 2008, moly prices hit a record $34 a pound, but fell to just $8 the following year. General Moly says it trades at around $14 a pound now, and U.S. Energy contends that its Mount Eammonds property would still be profitable if prices sank below $10.

Sticking to it
Advertising is benefiting from the improving conditions at carmakers Ford (NYSE: F) and GM, as well as at many financial companies and retailers. Let's not forget the viewing frenzy of World Cup soccer, too. While agencies are reporting strong earnings, some fear that this momentum can't be carried forward into next year, and that investors will simply turn the channel on media companies like Viacom, Disney (NYSE: DIS), and Time Warner.

That's not worrying apchempete, who thinks cocooning will keep viewers tuned in to what Viacom's playing:

Look for this company to rebound from recent losses. As people stay home due to energy pricing, entertainment will become king. This company has great earnings and has surprised on the upside twice recently. Look for that to continue going forward.

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.