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 Blackboard to TransDigm. 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: Zacks.com, Motley Fool CAPS; NA = not available.

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're the biggest name in telecom, you're going to be a big target for competitors -- even if you're name is Slim, as in Carlos Slim (also the world's richest man).

His America Movil telecom vehicle already owns the maximum amount of wireless spectrum permitted under Mexican law, as does Spanish peer Telefonica (NYSE: TEF). That allowed rivals Televisa and NII Holdings to place a lowball bid for wireless spectrum that was put up for auction. After numerous challenges, Mexican courts finally approved the sale.

However, when investors think about America Movil's stock, it's typically the NYSE-traded class L shares going by the ticker AMX, not the Nasdaq-traded A shares above that were created during the spinoff from Telmex back in 2001. Yet similarly large percentages of CAPS members think both classes of shares will do well, but you can dial up your own opinion on the America Movil CAPS page.

Rev those engines
When tornado-like windstorms swept through the northeast earlier this year, power in my area was knocked out for almost a week. Installing a gas powered backup generator that was wired into my home became a top priority for me.

With a 15% share of the market, Generac is the third largest manufacturer of power generation equipment, behind Caterpillar (NYSE: CAT) and Cummins (NYSE: CMI), both of which have 30% shares, respectively. While cautious about the economy, Generac believes just normal power outage activity will allow it to meet its guidance, but one can imagine that as increasing demands are placed on the nation's power grid, the need for just its backup generators will grow.

Caterpillar is certainly a more familiar household name than Generac, unless, like me, you were in the market for a backup generator. Then you can find its products in plenty of home improvement warehouses like Home Depot and Lowe's. Generac is flying under the radar now, but you can plug into this growing company by adding it to your My Watchlist page and having all the Foolish news and analysis of the stock aggregated for you in one place.

End of times
According to the Intermodal Association of North America, international container volume increased 21% to 1.8 million units in the second quarter compared with 1.5 million units in the year ago period, and international growth beat domestic growth for the first time in four years.

That's good news for container ship carriers like General Ship Lease and SeaSpan (NYSE: SSW), which will benefit from healthy growth regardless of where it's occurring, though new trucking regulations here at home could dampen domestic expansion. Without sufficient numbers of trucks to offload cargo, ships could end up backed up in port, causing a ripple effect everywhere.

Earlier this summer IntelligentAsset figured General Ship Lease's long-term contract made this container shipper a diamond in the rough:

A true undiscovered gem! Mr.Market has seriously devalued this company at the moment because with their solid balance sheet and long-term charter revenues and caps on operating expenses and a desire to give out dividends in the near future this company should be selling at around $12/share if not more! I purchased with real money and have made some tidy profits already

Keep a high profile
We've had three stocks today that hold a lot of promise that investors want to get behind, but possess equally persuasive arguments for swearing them off. It's why you need to look beneath the headlines and press releases to get a fuller picture of where your money is going.

Also check into Motley Fool CAPS and tell us whether these low profile stocks are on their way to higher returns.