Low-Profile 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 Atheros Communications to Portfolio Recovery Associates. Overlooked by Wall Street and Main Street, and thus often mispriced, 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 fewer active recommendations on CAPS, despite having double-digit revenue growth potential next year.

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 a company before you plug it into your own portfolio. With that said, let's take a closer look.

Under the radar
If the pharmaceutical business doesn't work out for it, BioSante Pharmaceuticals could always open up an orphanage. It received orphan drug status for its third drug last week, an experimental cancer vaccine used for the treatment of chronic myeloid leukemia. BioSante previously got the orphan nod from the FDA for its pancreatic cancer and acute myeloid leukemia vaccines.

The orphan drug designation confers some financial incentives upon drug companies to compensate them for developing therapies for diseases and illnesses with small patient populations. For instance, once gaining the status, companies get a seven-year window of exclusivity for selling the drug in question. That's one reason why you'll find industry giants like Novartis (NYSE: NVS) and GlaxoSmithKline (NYSE: GSK) pursuing orphan drug candidates alongside smaller operations like BioSante and ViroPharma (NYSE: VPHM). (Another reason is that these companies can then parley that status into expanded indications, broadening the sales base.)

CAPS member tdburrows thinks BioSante's pipeline of drugs will open the spigot for growth:

With it's female version of Viagra in the works, and now it's Leukemia vaccine designated by the FDA as an orphan, the faucet should begin to open for this small cap pharm.

Rev those engines
After suspending its dividend last year to conserve cash and pay down debt, Global Ship Lease has been steadily clawing its way back, thanks to improved global economic conditions. The industry downturn affected most container ship operators, though shipper Seaspan (NYSE: SSW) seemed insulated by its closer association with Chinese trade.

Global Ship Lease also amended its credit facility, allowing the company to avoid defaulting on covenants linked to the value of its ships. Since then, it's been able to maintain 99.9% utilization of its fleet, with just two unplanned days when its ships were off-hire.

Much of the risk relative to Global is that all of its 17 vessels are leased to just one company, CMA CGM, the former parent of Global Ship Lease. Its fortunes will rise and fall like one of its ships on the ocean, depending on how CMA does. Yet as CAPS member eleev notes, shippers should do well, since there's little choice when it comes to moving goods abroad.

Open spaces
It may sound like a resurrection of a 1980's Tom Selleck TV series, but Magnum Hunter Resources is actually an oil and gas producer. The company was able to grow revenues fourfold as it doubled production by 88% last quarter. Primarily, Magnum has generated these increases by expanding its base through acquisitions. But it hasn't turned a profit yet, leaving longtime CAPS All-Star UltraLong thinking there's nothing special here except an overvalued stock.

However, ValuePEG, another highly rated All-Star, thinks the relatively new management team will transform this speculative pick into a solid winner:

Going over his past history with MHR v1.0, and what he has done since taking over Petro Resources, he reminds me a lot of Biglari from [Biglari Holdings] (becoming a holdings company)-albeit only within the oil & gas E&P sector, as he has made numerous acquisitions already. Gary is bullish on Oil not so in the near future as far as NG, which is why the company is currently ~75% oil. His ongoing desire to be a low cost producer, w/ current focus on oil due to pricing, and actively hedge (significantly expanded hedges through 2011 last month) as production increases "Should" do well for investors and provide a modest level of safety. 

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.