A few weeks back I wrote a missive that -- self-high five -- was fairly well-received. Since I write enough articles that generate nothing but well-thought out reader critiques, I figured I'd go back to the well here, since I also like to receive positive feedback. (Thanks, Mom.)

My point a few weeks ago was threefold:

  1. Underfollowed small-cap stocks offer great returns.
  2. Wall Street is covering fewer stocks than ever before, making now a great time to start looking for mispriced small caps.
  3. Small caps can be dangerous when they're underfollowed, since there's not a lot to go on when researching prospective investments.

Let's take that bulleted list as gospel and move on.

Moving on.
As I did a few weeks back, today I'm going to highlight five stocks that were covered by three or fewer analysts, but that also received five-star ratings in Motley Fool CAPS. Looking where Wall Street doesn't can be a good place to find ideas, because you don't have to worry about outthinking the pros, as you do when trying to analyze companies tracked by small armies of analysts, such as Texas Instruments (NYSE:TXN) or AMD (NYSE:AMD).

But wait, what's this CAPS? I'll tell you. It's a brand-new community intelligence database that asks investors to rate stocks. In turn, every investor is ranked, as is every stock. As more people participate and more time passes, we hope to be able to determine the best investor and the best stock in America -- and potentially the world. (Admittedly, we'll have to roll this thing out of beta testing before we can start talking about global domination.)

Given that thumbnail sketch, hopefully you can see why CAPS has unprecedented potential to shed light on promising small caps. At our Hidden Gems small-cap service, for example, roughly six of us contribute ideas in a given month. But if you look at the list below, you'll see that at least 14 investors have offered their opinions on these small companies.

The list
Without further ado, here are five more five-star stocks that Wall Street may not know about:


CAPS Investors Covering

Analysts Covering

Current Analyst Consensus*

Cleveland Cliffs (NYSE:CLF)



Slight Buy





Healthgrades (NASDAQ:HGRD)



Strong Buy

Lamson & Sessions (NYSE:LMS)



Strong Buy

Raven Industries (NASDAQ:RAVN)



Strong Buy

*Data from Thomson Financial.

These stocks are offered up as ideas for further research. In fact, I encourage you to look into all of them. I'll get you started by saying that Healthgrades is a stock that I've been watching for a while.

You can also start by reading the analyses investors have offered in CAPS about these stocks and thousands more. And if you'd to like to add your own, you can do that, too. Just click here to join the free beta test of CAPS today.

Tim Hanson does not own shares of any company mentioned. The Fool's disclosure policy assures you that no stocks were harmed in the writing of this article.