Unloved Stocks Ready to Shine

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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 125,000-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. So let's look at previously rated one- or two-star companies that have recently enjoyed a bump in investor confidence, and see whether the stars are really aligning in their favor.

Company	CAPS Rating (out of 5 max)	Recent Price	Next Year EPS Growth
Crosstex Energy (Nasdaq: XTXI)	****	$2.63	(129%)
Dyax (Nasdaq: DYAX)	***	$2.04	41%
Informatica (Nasdaq: INFA)	***	$13.14	14%
LM Ericsson (Nasdaq: ERIC)	***	$8.52	24%
Realty Income (NYSE: O)	***	$18.20	3%

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
Having converted from oil heat to gas this winter after my old furnace broke down, the plummeting price of the fuel has kept me cozy while also reducing my expenses. Sure, oil heat is down, too, but my local utility, Public Service Enterprise Group (NYSE: PEG), will be lowering rates for the second time this winter beginning March 1, representing a total reduction of about 12% since the start of the year. That doesn't quite offset the 14.3% hike it instituted last October, but with wholesale prices continuing to fall, the boot's been taken off consumers' collective neck.

Alas, that boot has merely found a new site to stomp. Crosstex Energy, a midstream natural gas infrastructure operator, crumbled under the weight of plummeting energy prices last fall, as did better-known names like Chesapeake Energy (NYSE: CHK). Concerns about a heavy debt load caused Crosstex to shed some non-core assets to raise cash, reduce leverage, and increase its profitability. Despite my utility's rate cuts, it seems like energy costs might have reached a floor, which could leave a cyclical commodity like natural gas ready to waft higher.

Crosstex Energy has previously produced signs that it's ready to roar. Now, CAPS member dickseacup believes that Crosstex's streamlining gives the natural gas firm breathing room to position itself for real future growth:

Natural gas is a logical bridge fuel to cleaner, more efficient fuel sources (solar, wind, desktop cold fusion...OK, maybe not desktop cold fusion). Crosstex management recently shed some non-strategic assets and paid down debt while renegotiating credit agreements to provide more breathing room. I think once oil prices rebound, [Crosstex] will take off as well.

Share the love, won't you?
Are these stocks worth a place in your heart? If you'd like to find out, 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 with your own thoughts on which stocks you think might deserve a little investor affection. It's free to sign up and post your thoughts. What's not to love?