Wall Street's Best Hidden Stocks

When asked for the secret of his success, baseball player Wee Willie Keeler replied, "Hit 'em where they ain't." What worked for Willie at the plate applies equally well in investing. 

Seeking stocks that others ignore, shun, or simply forget gives individual investors like you an edge over the professionals. When Wall Street turns a blind eye, you have a chance to get in before these stocks get discovered -- or rediscovered -- and start taking off. 

Below, we'll check out companies with only a handful of analyst coverage and then pair our list with the opinions of the Motley Fool CAPS community. A stock that garners CAPS' top ratings, but hasn't yet caught analysts' attention, could be your next home-run investment. 

Source: Yahoo! Finance; Motley Fool CAPS; NA = not available.

Remember, without much analyst support, you'll have to do your own scouting to see whether these stocks deserve a spot on your portfolio's roster. Don't just buy or sell them based solely on their appearance here. 

Hiding in plain sight
When the Great Depression ravaged the country, housing prices at their worst plummeted 31% from their previous highs. Well, the current housing crisis is now officially worse than the Great Depression. According to Case-Shiller data, housing prices have entered into a double-dip situation and are 33% below their highs.

Like Annaly Capital Management (NYSE: NLY), American Capital Agency has taken what appears to be the expedient route of investing in mortgage-backed securities that are guaranteed by the taxpayer -- Fannie Mae, Freddie Mac, Ginnie Mae, and other government institutions. Some other mortgage REITs, such as Chimera Investment (NYSE: CIM), venture into non-agency-backed mortgage securities.

It's likely that American Capital Agency will build on the gains it has achieved thus far -- shares have risen 32% over the past year. Mortgage-backed bonds generally prosper when interest rates are stable over a fairly long period of time, because they tend to give homeowners little incentive to refinance their mortgages. The Federal Reserve has little incentive right now to raise interest rates in the current environment, meaning American Capital Agency -- and Annaly and other mortgage REITs investing in agency-backed securities -- should prosper.

That said, American Capital Agency uses a lot of leverage to generate the returns it has, so investors need to be mindful that it will have to reduce that debt when rates start to rise.

Fed Chairman Ben Bernanke seems loath to raise rates now, which is why CAPS member empireruler likes the stock: "Low interest rates and we will see a low interest rate as long as Bernanke is in charge of the fed and this will make the dividend safe. The company has shown [it's] bringing in more cash than the dividend compared to NLY witch i do like don't get me wrong but if the market increases [substantially] this [stock] will still outperform."

Let us know in the comments section below or on the American Capital Agency CAPS page what you think the chances are that the REIT will time interest rates just right.

Is the QE3 sailing?
If there's another industry that seems as devastated as housing, it's shipping. The dry bulk shipping market has run aground as charter rates collapsed among an overabundance of ships plying the seas. Genco Shipping & Trading (NYSE: GNK) was one of those adding to its fleet size, and it paid off -- somewhat, anyway, as top-line revenues increased marginally last quarter, where others saw declines. But operating expenses jumped and time chart rates tumbled, leading to a 64% drop in earnings per share.

Paragon Shipping also remained profitable for its 15th consecutive quarter, but its revenues were down along with time charter equivalents and higher expenses. It was hurt by the Korea Line bankruptcy earlier this year, and as the dry bulk market hasn't improved, it decided to suspend its dividend to conserve cash. It's a smart move financially but one rarely popular with investors, and its shares are down 42% so far this year.

With 97% of CAPS members rating Paragon to outperform the broad market averages, it seems they agree with CAPS member IIcx that the dry bulk shipper has bottomed out. Give us your opinion on the Paragon Shipping CAPS page, or add it to your watchlist to see whether it will sail again.

A big hole
The markets were less than impressed with Rubicon Minerals' report of its F2 gold zone in the Red Lake district. Earlier this year, Rubicon's consultant on the project scaled back by 10% the inferred resource estimate and sliced by 30% its high-end estimate of F2's total geological potential of up to 9 million ounces of gold. But with several promising core samples ranging from 22.5 to 148.1 grams of gold per ton, the mine still has the potential to generate a gold rush all its own.

Speculation still surrounds Rubicon's potential as a takeover candidate. With Goldcorp (NYSE: GG) a close neighbor in the prolific Red Lake district, it offers the most likely candidate. And with gold once again seeing forecasts to hit $5,000 an ounce, allowing such a potential, well, gold mine to develop right next door without trying to cash in seems odd. But Goldcorp did just close a $3 billion deal to buy Andean Resources last year, so it might want to digest that first.

Add Rubicon Minerals to the Fool's free portfolio tracker, and see whether it can dig up new opportunities for growth.

Swing for the fences
When you're seeking investments where no one else is looking, Motley Fool CAPS is the best place to start your own research. 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. 

Sign up today for the completely free service, and tell us whether these hidden stock opportunities will help us go one up on Wall Street.