7 Surprising 1-Star Stocks

Surprises are part of the stock-picking game. Sometimes they're bad news -- like one of your top stocks revealing that management has been posting anonymously to online message boards.

Other times, though, the market gets caught off guard by positive surprises from stocks that most investors thought were down for the count. In this situation, investors who stood by the stock often break out into a chorus of "I told you so," as short sellers are forced to figure out just how much pain they can take.

To dig up some of these unloved, naysayer-defying stocks, I'm turning once again to The Motley Fool's CAPS community. Each of the companies below had received a one-star rating (the lowest) from our community of investors just 30 days ago:

It's important to remember that some of these stocks, particularly the smaller, more volatile ones, could just as easily reverse these big gains over the next 30 days. In some cases, though, the strength could be a sign that the prospects for the company have changed for the better, or that it had been beaten down just a little too far.

Are these stocks better than CAPS players had thought, or are they just singing that proverbial swan song? The best way to get a feel for where these guys are headed is to dig in and do some research. I thought I'd kick you off with some thoughts on a few of these stocks.

Was the Pony Express late?
Apparently, somebody forgot to tell the AMEX exchange that stocks are supposed to be suffering. If you used your Sherlock Holmes magnifying glass when looking at the list above, you might've noticed that the top three on the list are all AMEX-listed stocks.

Let's consider Protalix for a moment. The stock tops the list thanks to a 56% pop yesterday alone. Why? The answer seems to just as well be "why not?"

You might say it's a mad, mad, mad, mad world out there right now. Only The Wall Street Journal's daily stories about a crashing credit market seem predictable.

A nasty side effect of the problems in the credit markets is that hedge funds are suddenly finding themselves with far less money to play with. Scrambling hedge funds can mean two things. First, that the country club's holiday party will be decidedly less cheery. And second, stocks can do some really funny things as funds try to unwind positions.

In his blog on CAPS, All-Star StatsGeek pointed out the same, mentioning that Protalix had a short interest of 2 million shares as of July 10. For a stock that averaged 46,343 shares traded per day over the past three months, that's a huge amount of short shares. With so many shares shorted, a couple of big players, sitting on shorts they have to quickly cover, can end up pushing the stock into the stratosphere. Hmm ... sounds familiar.

Of course, this is just a theory. Maybe somebody just realized the fantastic potential of the company, and decided they had to load up on shares at any cost. Whatever the case, a very turbulent and unpredictable market like this one has the potential to cause some quite surprising moves.

Are the big gains just the fruits of short-covering? Or is there more to these big jumps? Head over to CAPS and let the community 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 4,900-plus stocks on CAPS.

More CAPS Foolishness:

• 5 All-Star Stocks on Fire
• Invest Like a Pro: Goldman Sachs Asset Management
• 7 Highly Rated Stocks on Sale 

Fool contributor Matt Koppenheffer didn't see these particular moves coming, but he's rarely surprised at Mr. Market's general tomfoolery. You can check out Matt's CAPS portfolio here, or visit his blog. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is never going to give you up, it's never going to let you down, and it's definitely never going to run around and desert you.