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 140,000-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)
|
Recent Price
|
EPS Estimates
(This Year-Next Year)
|
|
CEL-SCI (NYSE: CVM )
|
***
|
$1.60
|
N/A-N/A
|
|
Hyperdynamics (NYSE: HDY )
|
***
|
$1.61
|
N/A-N/A
|
|
IMAX (Nasdaq: IMAX )
|
***
|
$10.79
|
$0.09-$0.47
|
|
Netflix (Nasdaq: NFLX )
|
*****
|
$50.35
|
$1.80-$2.15
|
|
Xerox (NYSE: XRX )
|
***
|
$7.69
|
$0.54-$0.72
|
Source: Motley Fool CAPS; N/A = not available. EPS = earnings per share.
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
Being forced to choose the areas it would keep for further exploration has allowed oil and gas exploration company Hyperdynamics to get off the dime, almost literally. Trading for just pennies on the dollar, the stock shook off the doldrums and increased its value by 50%, making it one of the top-performing stocks of the month.
Hyperdynamics operates in the high-risk, politically unstable country of the Republic of Guinea in West Africa, where a military junta seized power after the death of the country's president in December. The military rulers decided to force Hyperdynamics into hyperactivity by seizing two-thirds of the claims the previous government had granted the company. However, it has allowed Hyperdynamics to choose the areas it wants to keep; Hyperdynamics has hired consultants to help it map out the area.
As if that didn't provide investors with enough risk, the military caused additional consternation when it said that its top captain would run in the presidential elections scheduled for January. When tens of thousands of protestors gathered at a soccer stadium to voice their displeasure, the military opened fire. According to one human rights group, the attack killed more than 150 people and wounded more than 1,000. The International Criminal Court has launched an investigation, and the risk of the country descending deeper into the maelstrom seems to be growing greater.
West Africa's oil and gas reserves are attracting a lot of attention these days. Last month, CNOOC (NYSE: CEO ) , China's state-owned energy company, entered negotiations to purchase as much as one-sixth of Nigeria's proven petroleum reserves. Furthermore, Houston-based Vaalco Energy (NYSE: EGY ) produces oil from Gabon, in turn selling it to Total Oil Trading. If Hyperdynamics can come through the turmoil in Guinea intact, it could find itself with a profitable niche business.
CAPS member Torregrossa looks forward to the completion of the mapping:
2D and 3D Seismics will be completed soon. New management, especially with Herman Cohen, will get this project stabile. [Hyperdynamics] gets to pick the best locations for initial drilling.
Red hot or ice cold?
When you have to pay $10 or $15 per person to watch a movie in the theater, you want to get your money's worth. That's why CAPS member rbeitler thinks jumbo-screen maker IMAX is winning the battle for leisure-time attention:
Building theaters at a fevered pitch. This company either saves the American Theater experience (as in physically going out to see a movie) or the theater industry fades away, losing out to on-demand or other in home options.
IMO the [couple] extra bucks to see a blockbuster in imax is the only reason to go to a theater instead of watching from the comfort of your own home.
And IMAX has been expanding at a rapid rate, growing the number of screens from 183 last year to 273 screens so far this year, with more than 400 planned by the end of 2010. The silver-screen supplier is also incorporating the latest industry technology, and it expects that in the next 12 months, 50% of all movies it shows will be in 3-D.
All that infrastructure investment is paying off. IMAX revenue grew 67% in the first half of the year, and the company has just about managed to break even on the bottom line. Look for further eye-popping results ahead.
Checking the mercury
Are these stocks invitingly warm, or bitterly frosty? 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 hot little numbers, and which offer cold comfort. It's free to sign up.
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