When a company's share price is lower than the mercury in a thermometer in North Dakota 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 has made that move up.
Taking the market's temperature
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 135,000-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 stocks that had been rated one or two stars and recently enjoyed a bump up to see whether they're truly heating up -- or headed back to the deep freeze.
|
Company
|
CAPS Rating
(out of five)
|
Recent Price
|
EPS Estimates
(Next Year - Year After)
|
|
Universal Travel Group (NYSE: UTA )
|
***
|
$13.44
|
$1.25 - N/A
|
|
Openwave Systems (Nasdaq: OPWV )
|
***
|
$2.89
|
($0.02) - $0.03
|
|
Martin Marietta Materials
|
***
|
$86.15
|
$2.85 - $4.10
|
|
Weyerhaeuser (NYSE: WY )
|
***
|
$35.62
|
($2.46) - ($0.87)
|
|
BJ's Wholesale Club (NYSE: BJ )
|
***
|
$33.85
|
$2.50 - $2.70
|
Source: Motley Fool CAPS. EPS = earnings per share.
Obviously, this is not a list of stocks to buy -- just a starting point for further research. Yet if some CAPS members are taking notice of these stocks, maybe we should, too.
The sun's always shining somewhere
Last year, the big story in China was Beijing hosting the Olympic Games, making Chinese travel services leader Ctrip.com (Nasdaq: CTRP ) an intriguing stock. According to China's Civil Aviation Administration, domestic transportation volume grew 3.3% in 2008, despite severe winter snowfalls, a devastating earthquake in Sichuan, and political turmoil. That speaks to the power the Games held, even in a recession.
Universal Travel, also based in China, benefited as well. Compared with the year before, revenues generated from travel-related services and packages tripled in the quarter in which the Olympics were held, while revenues from hotel reservations rose 177%. Investors might consider similar growth possibilities for next year as well.
From May through October of 2010, Shanghai will host the World Expo. It's perhaps not as extravagant as the Olympics, but the Expo runs longer, so its impact could last longer. According to the Expo's tourism division, the event is expected to generate more than $11 billion, and draw upward of 1 million visitors a day.
Investors, though, are looking beyond the immediate impact of the Olympics or Expo and might focus instead on the increasing wealth of the country. Although Universal Travel has agreed to sell its air cargo business, CAPS member michaeltbryant still likes the company.
Travel business in China. Good margins. As Chinese economy grows, people will travel more and there would be more need for transport of cargo. And China has a lot of people.
The statistics bear this out. China's gross domestic product doubled from 2003 to 2007, a 16% compounded annual growth rate, while domestic tourism spending grew at a 23% compounded rate over the same period.
A big-box opportunity
Business doesn't seem to be expanding here at home, with unemployment hitting 9.5% in June and expected to rise to 9.7% for July. Warehouse chains BJ's Wholesale Club and Costco (Nasdaq: COST ) ought to provide a bit of relief for cash-strapped households, but they've been suffering drops in same-store sales, just like everyone else. While BJ's is perhaps less exposed than Costco to the impact of high unemployment -- in 2008, Costco derived 27% of its U.S. revenues from California, where unemployment is 11.6% -- its own heavy presence in the Northeast means it's definitely not home free. Unemployment is increasing in New York and New Jersey, where BJ's has nearly 30% of its stores.
It's probably little surprise that Wal-Mart (NYSE: WMT ) and its Sam's Club warehouse operations are better situated. With broad geographic coverage, no single club location accounted for as much as 1% of revenues.
The benefit for BJ's is that excluding gasoline sales, which boosted results last year on sky-high prices, its same-store sales were actually up. Costco's comps were still down. At less than half the store count of Costco, BJ's also has more opportunity to grow beyond the Eastern Seaboard. CAPS member akneefel agrees that expansion is the key.
room to grow hasn't saturated the market... probably a better stock to own than costco... based on P/E.
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. It's free to sign up and post your thoughts, so why not use this opportunity to take your star turn?
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