Investor sentiment is like 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 120,000-plus members, offer a great way to monitor investor sentiment. Like astronomers scanning the skies, investors can monitor 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. Let's look at previously rated one- or two-star companies that have made a move in the right direction while enjoying a bump in investor confidence, and see whether the stars are really aligning in their favor.
All of this week's stocks now score three stars out of a maximum five, according to our CAPS rating system:
|
Company
|
Recent Price
|
Next Year EPS Growth
|
|
Cadence Design Systems (Nasdaq: CDNS)
|
$3.95
|
500%*
|
|
Goodyear (NYSE: GT)
|
$6.21
|
(6%)
|
|
Medarex (Nasdaq: MEDX)
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$6.25
|
(343%)
|
|
Rambus (Nasdaq: RMBS)
|
$8.15
|
NA
|
|
Safeway (NYSE: SWY)
|
$22.19
|
7%
|
Source: Motley Fool CAPS, Yahoo! Finance.
*An estimated move from $0.01 EPS to $0.06.
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
The hard times Whole Foods Market (Nasdaq: WFMI) has fallen on represent an opportunity for discount supermarket chains like Safeway and Kroger. As consumers opt not to spend more of their income on high-priced organic foods, low-cost competitors are in a position to steal share. Safeway is making sure customers don't miss the value proposition; it's also offering discounts on gas purchased at its service stations when they buy groceries at their chains. CAPS member NOSMATTHEW thinks Safeway will succeed as consumers' quest for cheaper goods remains in high gear:
look for grocery chains heavy in store branded (generic) food items to see an increase in sales of these high margin items. with unemployment running higher, and higher, these cheaper alternatives look better, and better to the consumer. next reason? well, look for discretionary restuarant spending to drop, and grocery store sales to climb. need to eat at home and save the cash... fast food should be rather immune to this trend, as those still working need food @ lunch times. at least i do!
With Rambus wining a number of decisions lately regarding its patents, it's ratcheting up the pressure on some of its licensees. Most recently, Rambus has sought to ban imports containing NVIDIA (Nasdaq: NVDA) products. Such tactics can produce a consumer backlash, though. CAPS member onepremise finds the prospect of one company having such control disconcerting:
No one company should be able to monopolize DRAM technology. Especially when they didn't invent the technology themselves. They are just standing on the shoulders of giants like the defendants. I suspect Rambus potentially shot themselves in the foot and the companies mentioned above are going to migrate to newer technologies, avoid working with them, and dissuade from using this 'Rambus' technology altogether.
Shine your starlight
So are these stocks driving ahead or ready to crash? It pays to start your research on these stocks 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 with your own thoughts 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?
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