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. 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 fewer 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 reason, so make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.

Blinded by the light
The steady progression Antares Pharma has made in narrowing losses every quarter since we last looked at it has not abated. At the same time, two dozen additional CAPS members have taken notice of its prospects, and analysts see the pharmaceutical significantly improving its earnings potential.

Antares has been focusing on self-injectables and topical gel-based products. The market for injectable drugs is at $120 billion. But it's the gel-based product arena that gives Antares its best, most immediate potential. The FDA agreed to review its application to market Anturol, a treatment for an overactive bladder, and it expects the agency to make a decision by early December. With work on the testosterone gel that it's developing with BioSante Pharmaceuticals (Nasdaq: BPAX) following close behind in phase 3 development, Antares could turn a profit very soon.

CAPS All-Star MattoRuu finds Anturol a big catalyst for growth for the pharmaceutical:

Anturol targets a growing market for overactive bladder syndrome (OAB). In 2009, the U.S. OAB market was 2.1 billion USD. This market in the United States is expected to increase to more than 2.3 billion USD in 2014. In the United States alone, it is estimates that more than 34-million men and women are affected by overactive bladder syndrome.

Is it an overactive imagination, or are Antares bulls onto something here? Let us know on the Antares Pharma CAPS page.

Under the radar
Unlike much of the rest of the semiconductor industry, Mattson Technology doesn't look like it will be directly affected all that much by the events unfolding in Japan. In the past, that country represented about 20% of Mattson's total revenues, but it had shrunk to just 5% as of last December. Even so, Japan is responsible for producing two-thirds of the world's semiconductor wafers and 30% of the flash memory, and it uses nearly one-quarter of its silicon supply.

What happens in Japan doesn't stay in Japan very long. Fortunately, the wreckage thus far doesn't seem to extend very far beyond the disaster area's borders. ASML Holding (Nasdaq: ASML) was one of the first semi companies reporting after the crisis, and the fallout seems negligible so far. Intel (Nasdaq: INTC) followed with a fairly upbeat outlook.

Too bad Mattson can't be joining in the fun. It started the year off by trimming its guidance, causing its stock to plummet. It hasn't recovered yet, but with first-quarter earnings due to be announced this week, we'll get to see whether it can still enjoy the party everyone else has been frolicking at.

Almost 88% of the CAPS members rating the semiconductor equipment company believe it will outperform the indexes, and 94% of the three dozen All-Stars weighing in agree. Equip yourself to make your own decision by checking in on the Mattson Technology CAPS page and follow its progress by adding it to your watchlist.

Divine intervention
There's a reason a company like Medallion Financial exists: A New York City taxicab medallion now goes for $950,000 ("only" $650,000 if you're an individual). It's cheaper to buy a house these days -- two of 'em! -- than to get a piece of aluminum to let you pick up fares. Way back in the good ol' days of 2004, a medallion went for $289,000 and $241,000, respectively. With a compounded annual growth rate of 18%, it sure beats putting your money into stocks -- or real estate!

The cartel that controls the medallion industry ensures there is a limited supply of taxis. Not surprisingly, Medallion Financial generates over three-quarters of its loan portfolio from New York. Only 4% comes from Boston, where a medallion goes for $400,000. A mere pittance!

Although Medallion Financial faces competition from traditional lenders like Bank of America (NYSE: BAC) or the local credit union, the specialized nature of a medallion would seem to guarantee it the lion's share of loans. And though values can and do fall from time to time, and loans may go bad, a medallion could almost be said to be worth its weight in gold. That could be why almost everyone sees Medallion outperforming the broad market averages.

Hail a ride to higher growth by adding Medallion Financial to your watchlist.

Keep a high profile
We've gone beyond the headlines and press releases on these three stocks today. Check into Motley Fool CAPS and tell us whether these low-profile stocks are on their way to higher returns.