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 nearly 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 the lack of popularity -- a profitable business, good management, and some decent growth prospects.

As fellow Fool Rick Munarriz recapped over the weekend, Restoration Hardware made its big jump based on a buyout offer -- so unless you want to bet on a higher competing offer (which seems pretty unlikely), I wouldn't pile on this one. Homebuilders in general have seen a bit of a bounce lately, and while NVR is one of the higher-quality names, Beazer is not a stock that I have too much confidence in. And on the "sin stock" side of things, I'd like to see something more out of Private Media before taking a chance on that one.

Marshall & Ilsley, though, is one that might be more interesting. This is an $8 billion regional bank in Milwaukee that has certainly taken its lumps with the rest of the financial sector this year. In its recently released third-quarter earnings, skyrocketing loss provisions took a bite out of the company's earnings, leading to an 8% year-over-year drop in net income.

However, the bank has been making some moves recently. At the beginning of the month, it completed the spin-off of its slower growing technology unit, Metavante Technologies. The bank also announced that it will accelerate its buyback program and buy back $114 million of stock from Credit Suisse.

On CAPS, the stock has managed to get above the one-star status it was at a month ago. A number of CAPS players seem to have particular faith in the ability of M&I's management team. rlperez3 is one of them, noting that M&I has a "sound management team [and a] strong potential to grow after Metavante rolls out. [Its] past acquisition record [is] a plus."

So what's your take on M&I? Head over to CAPS and let the community of more than 74,000 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 5,000-plus stocks on CAPS.

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