When a stock's share price is lower than a North Dakota thermometer in February, investors tend to give it the cold shoulder. But as the market warms to a stock's prospects, its price can heat up in a hurry. Alas, you can rarely tell that a stock is melting investors' hearts until after it's made that upward leap.
Taking the market's temperature
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 130,000-plus members, offer a great way to monitor investor sentiment. Following a CAPS rating trend can help us determine the best time to invest. Let's look at previously rated one- or two-star companies that have recently enjoyed a bump in investor confidence and see whether they're truly heating up -- or headed back to the deep freeze.
|
Company
|
CAPS Rating (out of 5 max)
|
Recent Price
|
Next Year EPS Growth Est.
|
|
ACE (NYSE: ACE )
|
***
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$45.40
|
4%
|
|
Avery Denison (NYSE: AVY )
|
***
|
$27.58
|
63%
|
|
Boise (NYSE: BZ )
|
***
|
$1.51
|
114%
|
|
Conseco (NYSE: CNO )
|
***
|
$2.90
|
15%
|
|
Phoenix (NYSE: PNX )
|
***
|
$2.11
|
96%
|
Source: Motley Fool CAPS.
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.
Caution: Contents may be hot
Even as Berkshire Hathaway (NYSE: BRK-A ) was posting some significant losses following a number of losing bets by Warren Buffett and Charlie Munger -- rare misses for the investing geniuses running the show there -- its insurance business actually posted fairly solid numbers for the first quarter.
Even notorious insurer American International Group (NYSE: AIG ) was able to report a narrower loss than it had a year ago. It's seen its shares rise more than 400% since March.
So, when life and property insurer Conseco reported a profit for the first quarter, we shouldn't have been so surprised, right? True, its earnings came in below analyst expectations. But considering that investors were conducting a death vigil over its remains back in January, after its debt got cut to junk status and several states sought to revoke its insurer's license, Conseco's apparent recovery is a pretty remarkable feat.
The turn of events led top-rated All-Star CAPS member checklist34 to nominate Conseco as a survivor, albeit a speculative one:
[Conseco] looks, after yesterdays earnings call, like a survivor. They reported book value of 18.57 after FAS revisions, and the price is, even after going up 12 times, less than 0.2 of that. They also reported a profit after write-downs, which is a pretty good quarter for an insurer these days.
Here comes the sun
Are these stocks getting toasty, or still a frostbite risk? 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 are heating up. Since it's free to sign up and post your thoughts, why not use this opportunity to turn up the heat in your own portfolio?
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