5 All-Star Stocks

Win or lose, we all have an opinion about which stocks are rockets, and which are dogs. If we could invest like Peter Lynch or Mohnish Pabrai, we'd probably have a lot more companies in our win column than on the loss side of the ledger. Warren Buffett began buying railroads last year, and just about any company that ran on tracks came into play.

So when top-notch investors back a stock, you might want to give it more consideration. Over on the investor collaboration site Motley Fool CAPS, we can do just that. On CAPS, players who've earned a rating of 80 or better by consistently outperforming their peers are dubbed All-Stars. Sometimes, these ace investors will back a stock that others think is a dog. Considering the All-Stars' track records, we might want to look a little more closely at their selections.

Here are five companies that some investors have marked down but still enjoy unanimous All-Star backing:

Of course, this isn't a list of stocks to buy and sell; instead, it should serve as a starting point for your own research and analysis.

Lovely spam! Wonderful spam!
Although the Vikings in the hilarious Monty Python "Spam" skit might not agree, Commtouch Software's email defense systems protect our electronic mailboxes from the deluge of spam, spam, spam, eggs, and spam that assault us daily. Only without the eggs. The need for making such defenses ubiquitous got quite a boost last year, when Google (Nasdaq: GOOG) bought up little-known Postini, a provider of Web-hosted security solutions. Yet it's not alone in the seemingly crowded space.

Commtouch estimates that it contends against a bevy of bigger rivals, like TrendMicro, McAfee, and Brightmail from Symantec (Nasdaq: SYMC). Despite the number of players, there's a lot of opportunity in the space. According to Kaspersky Labs, itself an antivirus software company, the average percentage of spam email in February was 86.7%, up slightly from the month before. Anti-spam body Spamhaus estimates that junk accounts for 90% of all email transmitted.

Commtouch provides enterprise customers and OEM distributors with software such as its proprietary Recurrent Pattern Detection technology. It analyzes messages associated with mass email outbreaks and then directs the blocking of such emails, without needing to analyze individual messages.

The need to reach a broader audience and attract some institutional interest led Commtouch to affect a 1-for-3 reverse stock split last December. Though a regular split is often regarded as a non-event, sort of like carving up a pie into 12 pieces instead of six, a reverse split often portends a company on the verge of financial ruin and is desperate to distance itself from penny stock territory. The split was only a temporary salve for its shares, which immediately fell below the $5 mark soon after and have remained there since.

The reverse split didn't sit well with some investors, such as CAPS player jknispel, who nonetheless was enamored with the company and its prospects back in February:

Love this company:

No Debt. Increasing Revenues. Consistent signing of new OEMs.

The reverse stock split has played out very poorly, but they had a great earnings release, and the stock seems to have settled. Now that it has a it's legs under it, it will be propelled forward not only by the strong guidence, but the full realization of revenue from the contracts inked in 2007.

Looks to have a promising future in my opinion.

Other investors, like smith972, see Commtouch as a small company with a popular product, poised to "double in the next two years." Likewise, in December, faica predicted that Commtouch would become a buyout candidate in its own right:

The company keeps signing new licensees left and right and has already projected that 2008 will show continued and signififcant improvements in revenue and margins. The cash in the bank keeps rising and with the upcoming RS, available shares will become a scarcity once word gets out on this gem. I wouldn't be surprised to see the RS undone at some point down the road due to the increased demand for shares. Look for a bidding war among Microsoft, McAfee and Norton for this company at some point within the next couple of years.

An all-star act
Although a few CAPS investors have bet against the house here, we haven't yet heard from you. Why not head over to Motley Fool CAPS now and let us know what you think about these and your other favorite investments. It's completely free, and along with the other 95,000 investors there, you may help uncover the next All-Star Stock.