Like the song says, 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.

Yet the search for undiscovered jewels has informed many of our Motley Fool Hidden Gems picks, from Atheros Communications to Portfolio Recovery Associates. 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 less active recommendations on CAPS, despite having double-digit revenue growth potential next year.


CAPS Rating
(out of 5)

No. of Active Picks

Est. Revenue Growth
Next Year

Churchill Downs (Nasdaq: CHDN)




Lear (NYSE: LEA)




VirnetX Holding (NYSE: VHC)




Source: Yahoo! Finance, Motley Fool CAPS.

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 into your own portfolio.
Under the radar
I remember when my local bowling alley wanted to boost attendance, they turned off the lights, brought out the disco ball, and started playing party music. It must have worked, because the industry has experienced four consecutive years of growth, with 70 million people having bowled in 2009. The Bowling Proprietors' Association of America forecasts an additional 4.6% growth this year, and laser light shows are a staple at bowling alleys everywhere.

Racetrack operator Churchill Downs must have seen these reports because they're adding "themes" to their horseracing cards and will be hosting "Disco at the Downs" this week featuring disco balls and dance competitions. And to think I used to go to the track to watch the horses run.

Horse racing has fallen on hard times as big casino operators like Wynn Resorts (Nasdaq: WYNN) and MGM Mirage (NYSE: MGM) proliferate. The states have done little to help the industry either by allowing the formation of off-track betting sites (which cuts down on track attendance) and rolling out greater numbers of lottery games to attract limited gambling dollars.

No doubt it's part of the reason behind Churchill Downs' purchase of online horse race betting site The name behind the vaunted Kentucky Derby is looking to get into the forefront of online and phone betting, and is hoping Youbet's technology will allow it to take in more revenues. Although it seems to me it will hasten the demise of the industry, as there will be yet another reason to actually not go to the track, highly rated CAPS All-Star boomrsix views the mix of ventures Churchill Downs is pursuing as a good bet for growth.

depressed at this level......Breeders Cup next year....night racing a fixture......Twin Spires. com hot.....and expanded gaming in the next 3-5 years makes this a winner.

Rev those engines
Johnson Control
's (NYSE: JCI) bid for the electronics and interiors business of bankrupt Visteon could be the spark needed to fuel further buyouts in the decimated auto parts industry. The wave of consolidation many analysts had anticipated has been slow in coming, but a rebound by automakers has allowed suppliers Lear, TRW Automotive, and Magna to report strong results. That could lead to consideration by some to pick from their offerings. Just out of bankruptcy itself, Lear presents a possible candidate.

It also accounts for Lear flying under the radar of much of the investment community, though 94% of CAPS members rating the auto parts supplier believe it will outperform the market. You can bolt on your opinion on the Lear CAPS page as to whether you think it might make for an attractive merger target.

Open spaces
The big news for VirnetX, a maker of software and technology used for communications of the Internet, was of course its patent infringement suit settlement with Microsoft (Nasdaq: MSFT). The software giant chose to pay VirnetX $200 million, settle all other existing claims, and become its first licensee.

That's going to help VirnetX as it approaches wireless carriers rolling out their 4G networks. Every connected device on the network will be required to have a secure domain name, which is exactly what VirnetX's technology does.

iceeater thought the original jury award sent out notice to other tech companies and believes its secure network software will find a ready audience:

remember they have more products in the pipeline while having the only real and truly secure VPN connectivity system protected by patents and they are only a 20 person firm. So 106m only carrys enough weight in terms of significance and the message it should send. 

Keep a high profile
Sign up today for the completely free Motley Fool CAPS service, and tell us whether these low-profile stocks are on their way to higher returns. There you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.

Microsoft is a Motley Fool Inside Value selection. Atheros Communications and Portfolio Recovery Associates are Motley Fool Hidden Gems selections. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Atheros Communications and Portfolio Recovery Associates. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.