5 Cold Stocks Heating Up

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 150,000-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)

Boise (NYSE: BZ  )

***

$4.61

$0.15-$0.45

Cirrus Logic (Nasdaq: CRUS  )

***

$7.29

$0.32-$0.54

Elorado Gold (NYSE: EGO  )

***

$12.00

$0.28-$0.40

OSI Systems (Nasdaq: OSIS  )

***

$29.00

$1.31-$1.64

Royal Bank of Scotland (NYSE: RBS  )

***

$11.13

($3.62)-($1.69)

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
On the off chance anyone really thought the Fed was going to end the era of easy money in light of the recent discount rate boost, chairman Ben Bernanke laid that to rest with his semi-annual testimony to Congress. He says, in essence, "Not to worry -- we'll still shovel the dollars out as fast as we can."

While that's got to be a concern to us because of the risk of inflation it entails, not to mention economic collapse, gold bulls have to be heartened to know the government is doing everything it can to make their investment all that more valuable. Hedge funds are apparently thinking the same thing, as they've been loading up on the SPDR Gold (NYSE: GLD  ) ETF as gold prices fell from their recent highs.

That ought to make mid-tier gold miners like Eldorado Gold look more attractive to investors as well. With operations in Brazil, China, Turkey, and Greece and surrounding regions, it remains a top choice among knowledgeable Fools looking for gold exposure in Asia. All of the above adds up to an enticing opportunity for CAPS member SunSurgery:

gold miner, recently acquired Sino Gold in china, low cost of production, spiking gold prices. Buy on short term weakness, should do well over next 2-5 years with inflation and currency devaluation in USA.

Building a support structure
The financial situation in Europe is going to give new meaning to the phrase "bulls make money, bears make money, pigs get slaughtered." Or, more appropriately, PIIGS, as in Portugal, Ireland, Italy, Greece, and Spain.

The meltdown under way in Greece is about to get a rival in Spain, which some estimate will require as much as $270 billion to restore confidence in its financial situation. In comparison, it will only take around $68 billion to restore order in Greece, and we've seen the kind of hand-wringing and chest-beating that country's crisis has caused.

The worry for investors in U.K.-based banks like Royal Bank of Scotland and Barclays (NYSE: BCS  ) is that the jitters felt across the channel could spread to their home turf in London. According to bank analysts at JPMorgan Chase, Britain's top four banks hold approximately $110 billion in U.K. sovereign debt.

As regulators there call on the banks to bolster liquidity requirements by bulking up on government debt instruments, worries are growing that if Britain can't contain its own deficits after having bailed out banks like Royal Bank of Scotland last year, the next dominoes will fall there.

Highly rated CAPS All-Star member jamespeer isn't one who holds out much hope for RBS surviving very long anyway:

To summarize, this is the worst bank I have ever known of, with the worst management, and the worst financials I have ever seen. I have no doubt that their losses will continue to mount (they have the worst loan book of all the UK & European banks by far), and they will continue to lag behind and lose market share to their main competitors. This is a zombie bank that got way too big for their boots, and is now suffering the consequences, enduring a slow and painful regression into obsolescence...

Checking the mercury
Are these stocks invitingly warm or bitterly frosty? It pays to start your research at 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.

Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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