7 Surprising 1-Star Stocks

Part of being a successful investor is being able to think independently and having a strong enough conviction to stick with your ideas. This can be a difficult enough task when you're looking at a stock that the media and analysts generally like -- after all, in the stock market, there's a seller for every buyer -- but it becomes a far thornier proposition when you're looking at a stock that can't seem to find good press or bullish investors anywhere.

Of course, going against popular opinion has also led to great returns for many contrarian investors.

In that spirit, I've headed to the Motley Fool CAPS community to dig up some unloved stocks that have delivered big gains to shareholders over the past month. Our community of investors had given each of these companies a one-star rating -- the lowest possible -- just 30 days ago:

Now, I'm not recommending that you run out and buy these stocks! Their low ratings are a big, flashing red light. CAPS players have been pretty adept at picking out good stocks, and even better at pointing out bad stocks to avoid. In fact, an index set up to short the least-liked stocks in CAPS has outperformed more than 99% of all other CAPS players.

In other words, most stocks that are rated with one star in CAPS are likely to underperform. However, CAPS players aren't perfect. They've been overly negative on stocks such as Crocs and DryShips, both of which have delivered seriously impressive returns to their investors. So the question is whether any of the stocks in that table might be one of those undercover rockets.

Do research? You're kidding!
That's right, the best way to figure out whether any of these stocks is worth considering for your portfolio (real or CAPS) is to roll up those sleeves and dig in a bit. What we're looking for here are stocks that have good fundamentals despite their lack of popularity -- a profitable business, good management, and some decent growth prospects.

So how about this group? Well, ParkerVision is unprofitable and hasn't produced much in the way of revenue for the past few years. China's future may be great, but the multiple where China Natural Resources' stock is trading strikes me as a bit hefty for a mining company. And as for Pier 1, well, it'd be great to see that company pull back into the black.

But what about Fannie and Freddie? Both have been beaten up pretty badly this year; Fannie now trades at less than two times book value and offers a dividend of more than 5%. But the housing market has yet to show signs of shoring up, and nobody's really sure just how bad the whole situation will get. So it's not too surprising that more than half of the CAPS players that have rated Fannie have given it a thumbs-down.

Fannie isn't without its fans, though. CAPS All-Star ZachGruver recently called Fannie "a great government sponsored company that has done well over the long term" and said that "with this recent short term dip it looks like an attractive name at these price levels." Fellow All-Star rufianno likewise gave Fannie a thumbs-up and noted a very simple strategy of "buy and hold" for Fannie shares.

So what's your take on Fannie and Freddie? Head over to CAPS and let the community of more than 78,000 Fools know what you think. While you're there, you can start your research on any of the other stocks listed above -- or any of the 5,300-plus stocks on CAPS.

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