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 Guess? to Infinera. 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 fewer active recommendations on CAPS, though some in the community think they still have outsized potential.

Source: 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
Smaller's been better than larger when it comes to organic light emitting diode (OLED) screens. The proliferation of smartphones is driving growth because the phones incorporate the screens into their displays, and that has helped Universal Display (Nasdaq: PANL) shares gain 140% over the past year. Televisions featuring the technology will only be coming to market next year and might not gain complete consumer acceptance for several more.

If the small screen is king, then keep an eye on eMagin, a growing manufacturer of OLED microdisplays increasingly used for military purposes. CAPS member WhoCalcuttatwitt points to its supplying ITT with the OLED technology for its night-vision goggles as a key. The contract has a potential value of $15 million to eMagin, but that's just one of a number of defense contracts it has signed.

With only a baker's dozen of CAPS members rating it, eMagin's low profile means there's plenty of opportunity to still profit from its success. BluHrseshoo12 thinks that a management team that includes the former head of Eastman Kodak's (NYSE: EK) OLED team -- the one growing segment that company had before selling it off -- is a winner.

eMagin is the industry leader in semi-conductors. They have absolutely zero debt. Return on Equity is high. This is obviously important for a company that isn't paying dividends. The leadership at eMagin is great. Andrew Sculley used to head the OLED department at Kodak. I bought EMAN at 3.06 back when it wasn't available to rate. Now that they have new equipment being built to match production with demand, I don't see their growth slowing down anytime soon.

Searching for a clue
With Google's $6 billion bouquet of roses being spurned by Groupon, some investors are wondering whether Google has its eye on Local.com, or if some other player will be interested.

LivingSocial and BuywithMe are two of the names that surface when discussing the lookalikes Google might be pondering, and SuperMedia has cropped up, too. But investor interest in Local.com has shaken things up a bit, and its shares are 75% higher than they were a month ago.

Of the CAPS members rating Local.com, 94% think it has significant value, so why not add it to the Fool's free portfolio tracker. Then head over to the Local.com CAPS page and search the comments of your fellow Fools for greater insight.

Hope in treating cancer
Targeting brain cancer, Peregrine Pharmaceuticals recently reported that its experimental drug cotara helped patients live three-and-a-half times longer than if they had gone untreated, and some patients went on to live for nearly a decade more. The positive mid-stage trials are encouraging and the therapy is being researched for possible combinations with other drugs.

Assuming cotara makes it over the many hurdles still before it, the road to success may still not be smooth. Analysts point out that Spectrum Pharmaceuticals (Nasdaq: SPPI) has had a hard time getting appropriate reimbursements for the drug Zevalin, which treats non-Hodgkin's lymphoma.

In addition to cotara, Peregrine has bavituximab under development to treat non-small cell lung cancer, liver cancer, breast cancer, hepatitis C virus, and HIV. CAPS member joetoken thinks that drug candidate is worth a wager.

Their Bav drug is looking good in Phase II, worth rolling the dice for a few bucks, if it hits, this company goes huge, if not it could bust, so huge risk, with possible big upside

Add Peregrine to the Fool's free portfolio tracker to keep on top of all the news and analysis about its potential.

Keep a high profile
These stocks hold a lot of promise, but also draw equally persuasive arguments for swearing them off. It's why you need to look beneath the headlines and press releases to get a better 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.