These Cold Stocks Are Heating Up

When a stock's share price is lower than the mercury in 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 has made that move up.

Taking the market's temperature
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 160,000-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.

Source: Motley Fool CAPS; NA = not available.

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
We know that Sigma Designs (Nasdaq: SIGM) crushed expectations as demand for its IPTV chips rose, causing its CEO to predict that the market "is moving into a new growth phase." Perhaps that explains the global development underway, with SeaChange International rolling out services across India over the next few years and City Telekom ready to take off in Hong Kong.

According to the market researchers at iSuppli, global shipments of IPTV set-top boxes are set to jump 50% in 2010. Sounds like Sigma Designs' CEO is right on top of things.

CAPS member cw33wc writes that City Telekom has Hong Kong to itself as a growth market. All-Star nibs61 would be hard-pressed to disagree with that, writing this last November:

hong kong cell and Internet market leaders. This is an emerging market and they are the leaders in this industry that is growing leaps and bounds. I have been watching this stock since it was $4.50 and finally pulled the trigger in my personal account.

Solid as a rock
Despite expecting earnings that were lower than what Wall Street was looking for, which led to a collapse of its stock price, there's still a good reason to consider Compellent Technologies. Solid-state drives are aiming to supplant hard drives as the primary storage device in the very near future. STEC (Nasdaq: STEC) is considered the industry leader, but Compellent's drives get high marks, too.

Even though trial attorneys might file a class action lawsuit after the earnings miss, CAPS member rhvonlehe finds Compellent Technologies to be a respected name in the industry nonetheless.

Hit too hard for a 10% miss this quarter, though earnings are still above last year. A solid company well-respected in the storage industry.

A golden opportunity
With gold still at elevated prices and hitting new highs this week, it might seem strange to see Gammon Gold trading 36% below where it was when the year started. At least Eldorado Gold (NYSE: EGO) and IAMGOLD (NYSE: IAG) are at about the same spot.

Gammon has had its share of troubles, though, with operational issues at its wholly owned Ocampo project in Mexico. Silver production was off 5% there while gold output dropped 23% for the first quarter. After beating the stock up, the market is taking hope in the new board members prepared to take charge. With industry veterans guiding what was apparently a rudderless ship, Gammon may yet prove DarthMaul09 right when the CAPS member wrote back in January that investors can look to mid-tier miners for a modicum of safety.

Bottom fishing after the sell off on Friday. The selling before a long weekend suggests some profit taking after the early new years bounce. Investor sentiment appears mixed. I know that I feel most comfortable raising some cash now and waiting to see which way the market breaks. Mid size miners appear to be a safe bet long-term but only if you can get in after a 1 to 2% fall in price.

Checking the mercury
Are these stocks invitingly warm or bitterly frosty? 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 hot little numbers, and which offer cold comfort. It's free to sign up.