Surprising Low-Rated Stocks the Leaders Love

Piggybacking on the picks of great investors and money managers can often lead to big rewards -- especially when the stocks in question have been punished. If Warren Buffett finds opportunity in bonds, perhaps you should look there, too. Does Bill Miller think financial stocks are beaten down? Maybe investigating more closely will help improve your own results.

Over on Motley Fool CAPS, our top-rated All-Star players represent the best 20% of our 110,000-plus professional and novice investors. I'm looking amongst them for those who've chosen one- and two-star (out of five) stocks to outperform the market. The majority of CAPS investors may consider these stocks losers, but if our ace contrarians think otherwise, these picks might be worth a look.

Here are a few stocks that have gotten the nod from the cream of our CAPS investors:

Sources: Motley Fool CAPS, Yahoo! Finance. NA = not available.

Getting an earful
Corn-based ethanol has been coming under assault from critics who contend both that food should not be used to make fuel and that the process causes a host of unintended consequences, such as higher prices for basic foodstuffs and meat. It's that play on the economics theory of "guns or butter" that has top-rated CAPS All-Star Gtrinvestor thinking VeraSun and other ethanol players will eventually fall out of favor.

Too bad ethanol is doomed for failure (at least in its current state of literally making decisions between feeding people and making cheaper fuel). Also, from what I have read, the entire ethanol industry is a farce that it "helps" the environment, etc. I like scbeachbum's theory on why there is a current bottom to these stock prices, but in the end, these things are going to have to be used for something else, like making a cool new edgy condominium complex or something of that ilk. 2 thumbs down out of 3.

A hot idea
Geothermal energy uses Earth's natural heat to generate electricity. Raser Technologies is seeking to develop a series of geothermal plants around the West that will provide enough electricity to power around 9,000 homes each. Geothermal plants have higher initial building costs than fossil-fuel plants do, but they have lower long-term costs. Raser also says it has shortened the time span to construct one of these plants from several years to several months. Whether it can deliver on these promises or not, some critics contend that Raser's management is mostly hot air.

Some investors find Raser to be all hat, no cattle, to use a Texas slogan about a boastful person. CAPS player bluedome finds its business segments to be a curious amalgamation:

This company is all website, no products. I distrust any company that is trying to do two completely different things at once (motors and geothermal energy). Most good businessmen pick one and try to compete! The green blanket can't protect them indefinitely from reality, someone has to give them money to burn.

Others, though, simply find the motor division to be the biscuit wheels on Raser's geothermal gravy train. CAPS player rasputin12540 said back in April:

This is a REAL company that is laying out geothermal power systems 15MW at a time. This may not seem like a lot of energy, but they can get them up and running in just under 18 months! And they are expandable. This is a recipe for success, even discounting their super-efficient car motor division.

Finding value under rocks
So there you have it -- five low-rated laggards that have gotten big endorsements from some of the best and brightest investors in the CAPS community, although there are always some who are not so sure. If you want to add your two cents on these or any other companies, sign up to join Motley Fool CAPS, absolutely free.