Hidden Stocks for High Returns

To paraphrase the song, 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. 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 the community thinks 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 in to your own portfolio.

When you're hot, you're hot
Keeping an eye on where your resources are -- whether it's personnel or vehicles -- is becoming increasingly important for companies. CalAmp provides the technology to track and communicate with those resources, regardless of where they're located. It also helps satellite-programming providers EchoStar (Nasdaq: SATS) and DirecTV (NYSE: DTV) locate their equipment at the consumer's house.

The satellite business has been lagging the wireless-networking line, with segment sales falling 34% in 2010 (wireless datacom jumped 36%). The first quarter saw a turnaround, though, and while wireless continues to run ahead with 39% growth, satellite revenues were up strongly at 20%, and operating losses narrowed.

CalAmp remains one of those behind-the-scenes support companies that its customers probably couldn't live without if they went away. While it remains largely out of view from much of Wall Street and Main Street, those who have tuned in to it expect it to beat the market averages, with three quarters of the CAPS members rating it having a positive outlook.

Add your own thoughts on its potential on the CalAmp CAPS page.

Under the radar
Even if online security company Blue Coat Systems (Nasdaq: BCSI) has some kind of name recognition among the general public because it gives away its consumer-level monitoring software while charging for its enterprise-level version (I've installed Blue Coat's "safe surfing" K-9 Web protection package at home and recommend it for monitoring and protecting young family members' Internet usage), with the plethora of hacking attacks we've witnessed at Sony, Lockheed Martin, and even Apple, expect Fortinet's profile to growth that much larger. It recently published a report highlighting the most prevalent attacks that businesses have experienced and noted the importance of implementing both IPS solutions and firewall protection for "public-facing digital assets."

CAPS member Brock8jags said Fortinet was already seeing sharp growth before the most recent hacker attacks, which means business is only going to get better.

Cyber security has been brought to light as of late with all of the high-profile data hacking. Even if hacking subsides, companies now realize the pertinent need for protecting their internal data and their customers. Companies will choose Fortinet because of its Unified Threat Management system, which many feel is the best in the industry. Earnings have grown steadily, and the last few earnings releases have had upside surprises resulting in continued uptrending and price adjustments on earnings days.

Protect yourself by adding the stock to your watchlist, and let us know on the Fortinet CAPS page whether you think the security appliance maker is a relatively risk-free investment.

Pay it forward
And speaking of security, LML Payment Systems lets businesses know in seconds whether the credit card payment you're processing at their store has the funds to back up the charge. Its authentication services present a big opportunity, particularly as more companies will find it necessary to sign up LML.

It's scored major patent-infringement victories against some big industry names such as eBay (Nasdaq: EBAY) and Citigroup, though that also suggests that it will need to continue adding new customers or it will wilt and die. Revenues soared 1,000% on the settlements, but those are one-time infusions that will be difficult to replicate.

Wall Street hasn't been paying attention here, but investors have, and only one of the 75 CAPS members rating LML doesn't think it will beat the market averages. You can add the authentication services provider to the Fool's free portfolio tracker to see whether it's able to transact greater growth.

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. That's why you need to look beneath the headlines and press releases to get a fuller picture of where your money is going.

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