Hidden Stocks for High Returns

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 Dynamic Materials to Seaspan. 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, though the community thinks they still have outsized potential.

Source: Motley Fool CAPS; NA = not available.

Naturally, we want you to look a bit closer at these stocks before buying. Maybe investors are staying away from these stocks for a specific reason, so make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.

Under the radar
For five years running now, the U.S. has avoided a major cyclonic event like Hurricane Yasi, which just slammed into Australia the other day. Though no major storm made landfall in the U.S. in 2010, Generac was still able to generate an 11% increase in third-quarter net sales. In particular, home standby generators helped power a 12.6% jump in residential product sales, and if the coming spring rainy season is anything like last year's, the company's likely to see growth again.

Generac is flying under the radar now, but you can plug into this growing company by adding it to your watchlist. We'll gather all our Foolish news and analysis about the stock in one convenient spot, just for you.

All that glitters...
For many pundits, gold has lost its sheen, and not even the developing unrest in Egypt, Yemen, and Jordan could move the precious metal appreciably higher. Even if gold bears are correct, diversified miners like Freeport-McMoRan (NYSE: FCX) and Newmont Mining (NYSE: NEM), with heavy stakes in gold and copper, can still win in multiple scenarios. Smaller outfits like Minco Gold need some other catalyst to keep them moving, and this Canadian gold miner may have found it -- on the other side of the Pacific.

China now possesses the world's sixth largest national gold reserve, with more than 1,161 tons of the yellow metal. It's also become the largest gold producer, even encouraging its citizens to start buying gold. Minco owns an exploration property portfolio covering more than 1,000 square kilometers of mineral rights in China, and it just announced that it will buy a 51% stake in a joint venture for a mine that has been producing gold since 1996. The Tugurige Gold Project is currently operating at 600 tonnes per day.

The gold miner has a pretty small following on CAPS right now, but every single one of the two dozen All-Star CAPS members who've rated it think it will outperform the broad market averages. Be sure to add Minco to the Fool's free portfolio tracker, then head over to the Minco Gold CAPS page to mine additional insights into this tiny gold player.

A slew of slurry salutations
Highly rated CAPS All-Star TSIF believes that Sino Clean Energy and its coal-water slurry fuel  provide a unique growth opportunity:

Their coal-water slurry fuel seems to have some merits and they claim to be sourcing from coal mines nearby at favorable prices. They've increased their customer base, added a factory and continue to expand at what appears to be a reasonable rate. They've seen $8 plus for different times in 2010 and I think their is more chance from this $6.50 range to break out than to drop off. Concern for China based company's will probably keep this one from seeing its full potential.

As one of the only publicly traded producers of CWSF, Sino Clean Energy has a unique position to grab a large share of the market. Frost & Sullivan estimates that CWSF emits 80% less sulfur dioxide and 49% less soot than an energy-equivalent amount of coal. You can add Sino Clean Energy to your watchlist to keep on top of all the news and analysis about this insurer's potential.

Keep a high profile
Today's three promising stocks possess equally persuasive arguments against them. That's why you need to look beneath the headlines and press releases to get a more complete  picture of where your money is going.

Also, check into Motley Fool CAPS, and tell us whether these low-profile stocks are on their way to higher returns.