7 Surprising 1-Star Stocks

Using the new Motley Fool CAPS investment research service, I've looked at some poorly rated stocks that have shown signs of persistent life over the last month. As sure as Mr. Market keeps at his games, good stocks get beaten down, and bad stocks have their day in the sun. Here we are again with another batch of unloved outperformers. Have these stocks turned onto the fast lane, or are they fool's gold?

Here are this week's scintillating seven, as identified by your fellow Fools on CAPS. Each of the companies below had been given a one-star rating (the lowest) by our community of investors just 30 days ago:

This is usually the part where I say that although a few of the stocks have kept their one-star rating, a few have been upgraded by the community. Well, the Fools on CAPS were a bit harsher with this group, leaving all but one of the stocks at a lone one-star rating despite the strong run each has been on. The one to get upgraded? Cooper Tire, which went from the lonely one star to a not-that-much-hotter two stars.

Baidu's bears
Baidu is an eye-catcher in this group, simply because it's such a popular stock. OK, maybe "popular" is the wrong word. Let's just say it's a highly trafficked CAPS page. Overall, there are currently 340 active picks out on Baidu, though with about a third of those being "underperforms," there's a distinctly bearish flavor to the Baidu chatter. The Baidu bears just keep getting more aggressive, too. On Tuesday alone, there were five new CAPS All Stars giving the stock the big thumbs-down. One commented that the stock is "just too overpriced even when compared to U.S. peer Google."

Over the past month, there has been some good news coming out of Baidu, including a collaboration with eBay's (NASDAQ:EBAY) EachNet service in China, a favorable ruling from the Chinese courts on some music downloading issues, and the announcement of an entry into the Japanese search market. Though these no doubt helped push the stock up, it doesn't appear that Baidu's big days were directly tied to any particular news.

Also of note for Baidu was its inclusion and honorable mention in The Motley Fool's Best International Stock for 2007 contest. Fellow Fool and Baidu buddy Rick Aristotle Munarriz argued that Baidu is poised for still more growth even after already quadrupling from its IPO price of $27. Rick points out that not only is "China's Google" beating the original Google (NASDAQ:GOOG) in China, but it has also rolled out some great add-on offerings similar to Google's Blogger and Yahoo!'s (NASDAQ:YHOO) Yahoo!Answers. Though I consider a 2008 P/E of more than 35 a bit too rich, The Motley Fool's Rule Breakers portfolio has been showing for a long time now that some of the best stocks are exactly the ones people consider overvalued. Besides, with a 58-point gain in his CAPS portfolio from Baidu alone, Rick is surely laughing at the bears right now.

Cooper bounces
The nice thing about expectations is that once they're set, a stock can do well by beating them, even if they're not terribly lofty. Case in point: Cooper Tire, which showed less of a loss in its third quarter than analysts had expected. Though the company has been struggling, and still has a long, likely pothole-filled road ahead of it, the stock saw a strong move upward after its third-quarter results were announced. Sales growth has been a positive for Cooper, but raw-material prices and operational costs associated with its inventory reduction program have been hurting the bottom line.

On Tuesday, the stock got another boost when a Deutsche Bank analyst upgraded the stock from hold to buy and put a $19 price target on it. He cited the potential for industry demand to pick up, and for Cooper to continue showing operational improvement through its turnaround efforts. The upgrade also gave Cooper a boost in CAPS; Deutsche is a top-ranked Wall Street firm in our service, clocking in with a hot 99.81 rating.

Are any of these worth going out and taking a chance on? Could be, but at the very least, they might be excellent candidates for further due diligence. In the meantime, get in the game and get yourself heard. You'll also be able to read timely analysis from our community, and perhaps offer your own pitch for one of these stocks. CAPS is entirely free, and unlike first dates, phone booths, and VW Rabbits, it's definitely a place where "the more the merrier" is actually true.

Eager for more surprises?

• Last week's shockers
• Baidu in Japan
• Any air left in Cooper Tire?

Fool contributor Matt Koppenheffer didn't see these particular moves coming, but he's rarely surprised at Mr. Market's general tomfoolery. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is always expected.