Think of investor sentiment as a pendulum whose swing corresponds 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 79,000-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, tracking investor sentiment to help determine the best time to invest. Let's look at formerly 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 |
|---|---|---|---|
|
Sangamo Biosciences |
*** |
$11.96 |
81.8% |
|
Capstone Turbine |
** |
$1.70 |
47.8% |
|
TiVo |
*** |
$7.39 |
35.6% |
|
Time Warner |
*** |
$15.91 |
(27.6%) |
|
OpenTV |
*** |
$1.13 |
(56.5%) |
Obviously, this is not a list of stocks to buy -- just a starting point for further research. Still, consider the case of Motley Fool Stock Advisor pick Time Warner, which was downgraded by CAPS investors in mid-October, undoubtedly as its America Online division announced a 20% cut in its workforce. At the same time, the parent company's shares, which had just started to climb, began sliding again. But now CAPS investors are looking up again, perhaps hoping that some fur-footed Hobbits will capture a fortune in dragon's gold for them.
Who turned out the lights?
In 2003, the most massive blackout to hit the U.S. electric power grid plunged much of the Northeast, Midwest, and even parts of Canada into darkness. While it may have made for some cozy times -- despite studies that showed no resultant baby boom nine months later -- businesses that relied upon electricity were left in the dark like everyone else.
Total reliance on the grid has inspired many businesses to seek alternative energy sources, including Capstone Turbine. This small, 20-year-old company manufactures microturbines that produce power on-site, either in conjunction with the grid or as a stand-alone source of power. Capstone's small, 30-kilowatt microturbines can produce enough electricity to power a convenience store. The company also makes several large models, and it recently unveiled the first megawatt microturbine.
Because the turbines can run on a variety of fuels, they can be a low-emission form of energy production. And they need little maintenance, because they require no lubrication.
As we saw last month, CAPS leaders are falling in love with Capstone. Yet its lack of profitability has others thinking it's on its deathbed -- or at least in the ICU. Still, CAPS investors recently upgraded Capstone's prognosis, apparently acknowledging that businesses have an overwhelming need for the company's offerings.
That's the reasoning behind CAPS player JesterJay's outperform rating for Capstone. Since its microturbines can also be used in alternative-fuel cars, the company may have a much larger market than just commercial use:
Plasma Gasification of waste is here with economic reality ... CPST will win power deals for onsite process of gas among other uses of their turbines. You might say there is a reason CPST is at an all time low ... you also might say there is a reason CPST is still worth north of 200 mil....
New York City just released regulations for installing microturbines in buildings. With an estimated 79% of greenhouse gases in New York emanating from buildings, the rules -- which Capstone helped the city's task force develop -- might provide additional impetus for sales. Along with the company's "near profitability," that could make 2008 an interesting year for the company, says CAPS investor sluggger222:
Aside from the "Green" angle, the new product, the New York order..... This is an international company. It is near profitability. If its profit statement goes green this year, this stock is headed for big growth.
Shine your starlight
Will Capstone finally cap a year with profits? 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. It's free to sign up and post your thoughts, so why not use this opportunity to take your star turn?
