Think of investor sentiment as a pendulum that swings in tandem with a company's share price. When investors begin to think highly of your company, its stock might also start heading in the right direction. Alas, you can rarely tell when investors are warming to a stock until after it's made that upward swing.
An astrolabe for investors
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 89,000-plus investors, offer a great way to monitor investor sentiment. Like astronomers scanning the skies, investors can follow a stock's stars through its CAPS rating trend and track investor sentiment to help determine the best time to invest. Let's look at one- or two-star-rated companies that have recently enjoyed a bump in investor confidence and see whether the stars are really aligning in their favor.
|
Company |
CAPS Rating |
Recent Price |
1-Year Return |
|---|---|---|---|
|
UltraShort Financials ProShares |
*** |
$106.66 |
50.9% |
|
Blue Nile |
*** |
$46.89 |
14.1% |
|
TheStreet.com |
*** |
$7.99 |
(33.1%) |
|
Anthracite Capital |
*** |
$6.83 |
(37.6%) |
|
Qwest Communications |
*** |
$4.82 |
(45.2%) |
This is not a list of stocks to buy -- just a starting point for further research. Yet if some of CAPS' best investing minds are taking notice of these stocks, maybe we should, too.
A coal-black heart
The residential mortgage markets haven't been a gold mine of opportunity these days, but the commercial markets had escaped most of the collapse -- until recently. According to the MIT Center for Real Estate, however, things may be changing. Retail property prices fell 3.5% last quarter from the year before, while office properties declined 0.4% for the same period. Industrial properties, on the other hand, were able to show a small 1% increase.
Although pricing may start taking a hit, commercial borrowers tend to have greater access to capital than residential borrowers might, and so a drop in the commercial market should not represent the same kind of default prospects. With greater leeway, the commercial real estate market may miss the worst aspects that have hit other sectors.
Still, that hasn't stopped the markets from treating Anthracite Capital, a real estate investment trust, from being knocked about. Investing as it does in a portfolio of commercial mortgage-backed securities, Anthracite has lost more than a third of its share price over the past year.
A number of investors see the potential for that situation to change, particularly because the Federal Reserve has shown its willingness to step into the capital markets and ensure that liquidity remains present. Maybe it could have acted sooner -- analysts at Bear Stearns
CAPS player fewli0 wrote a week ago that the commercial real estate market isn't in the midst of the same bubble that gripped the residential market.
It is true that real estate values continue to drop, but commercial real estate isn't nearly as large a bubble as residential is. Last week's earnings report was very positive. ... Commercial mortgage delinquencies remain at record low levels. Based on currently available information, this stock has nowhere to go but up. Look for a large amount of shorts to cover before the upcoming ex-dividend date of March 31st to avoid paying the dividend.
Others find Anthracite's dividend to be a nice payoff while they await the market's realization of the error of its ways. Take this pitch from TheBub7, written a bit more than a month ago:
AHR is a diamond in the rough ... between the dividend and the undervalued, oversold price tag, this is one of my favorites, as I continue to make bank on the lush dividend ... oh yeah, no subprime exposure here, but it has been knocked down with all of the other financials lately ... I ... rejoice in the dividend.
Shine your starlight
So is Anthracite Capital a diamond, as CAPS investors suspect, or just plain coal? Well, we haven't yet heard from you, and at Motley Fool CAPS, every investor's opinion counts. Your voice could determine whether these stocks become shooting stars or supernovas. Since it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?
