Unloved Stocks Ready to Shine

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 has made that upward swing.

An astrolabe for investors
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 115,000-plus members, 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. Data suggests that CAPS' highest-rated stocks performed best while the lowest-rated did worst, so let's look at companies previously rated one and two stars that have recently enjoyed a bump in investor confidence to see whether the stars really are aligning in their favor.

Source: Motley Fool CAPS, Yahoo! Finance.

Obviously, this is not a list of stocks to buy -- just a starting point for further research. Yet if some of the best investing minds are taking notice of these stocks, maybe we should, too.

The sun's always shining somewhere
Getting caught in the quagmire of the financial markets is not too hard these days, and Ameriprise Financial -- which offers advice to investors in all markets -- is undoubtedly feeling the fear. CAPS All-Star CubsBearsBulls43 acknowledged back in July that the company was getting dragged down by the markets, but still felt it had a valuable franchise. The stock may yet turn around.

I think this stock is getting punished because it is in the financial field. They still have a strong business franchise with a growing client base for personal financial management and strong insurance division. We should start seeing some upside soon.

The ratings for Greatbatch are on the rise, on the heels of the company reporting a big boost in sales. The manufacturer of components for implantable medical devices -- for uses such as cardiac rhythm management -- said sales were up 81% last quarter, fueled in part by a developing acquisition strategy. While that holds some risks, Greatbatch is seeking to diversify its offerings, which might bring more stability later on. Factor in a growing neurostimulation business, along with customer relations with companies like Medtronic (NYSE:MDT) and Boston Scientific, and Greatbatch could be putting out a series of positive numbers soon.

CAPS members certainly hope so, with 87% of those who rate Greatbatch believing it will outperform the market.

No doubt a slowing economy will force consumers to spend less at retailers and restaurants. That's a concern for those who sell products to speed consumer transactions, like VeriFone Holdings, which provides payment processing systems. Last month it missed the mark when quarterly sales rose 12% over the prior year but earnings came in a few pennies below expectations.

Yet, offering restaurants an opportunity to distinguish themselves with tableside payment systems was enough for Motley Fool Hidden Gems recommendation Heartland Payment Systems (NYSE:HPY) to market VeriFone's WiFi-based systems. That seems to underscore CAPS All-Star Rep07's belief that VeriFone ought to "survive even in bad times."

Shine your starlight
So are these stocks driving ahead, or ready to crash? It pays to start your research on Motley Fool CAPS. 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. Then weigh in on which stocks you think are 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?

In the coming weeks, Fool Co-Founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. The service, which just launched, will rely heavily on proprietary CAPS "community intelligence" data to establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.