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 170,000-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 recently enjoyed a bump in investor confidence and see whether they're truly heating up -- or headed back to the deep freeze.
EPS Estimates (This Year-Next Year)
|Alphatec Holdings (Nasdaq: ATEC )||***||$2.04||$0.01 - $0.06|
|Savient Pharmaceuticals (Nasdaq: SVNT )||***||$12.06||($1.34) - ($0.77)|
|Solarfun Power (Nasdaq: SOLF )||***||$9.29||$1.60 - $1.74|
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
The slowdown in spinal procedures has hit not only Alphatec Holdings, but Stryker, too, which had only a modest increase in sales. Both Alphatec and Stryker, however, are looking for European growth to help lift their businesses.
Despite reporting wider losses in its latest quarter, Alphatec said that its international business has stabilized. Stryker reported that its international markets brought a 4% increase in spinal sales compared with flat domestic sales. Both companies are looking to acquisitions to help push them ahead, with Alphatec's acquisition of Scient'x expected to further boost European sales and Stryker buying the neurovascular unit of Boston Scientific (NYSE: BSX ) .
Even with the potential for growth, a sizable contingent of CAPS members (25%) rating the stock think Alphatec will have difficulty beating the market, not too surprising because the company lowered its full-year guidance. However, its restructuring sets the company up to be a pure play in the spinal market; let us know what you think on the Alphatec CAPS page.
A clear road
Having gotten approval for Krsytexxa, Savient Pharmaceuticals expected to have an easier time peddling itself to a bigger pharma that would find its gout treatment a nice niche addition to its portfolio. Yet as I said back in September, the higher price tag the approval put on the company seems to have scared off potential buyers.
The new lower price Savient trades at now -- its shares fell 43% on the no-sale news -- should give investors a good entry point. Savient still plans on going to market with Krystexxa, so companies like Pfizer (NYSE: PFE ) or Bristol-Myers Squibb (NYSE: BMY ) , which were rumored to be potential partners, can see how well the drug does in the marketplace. And gout is receiving more attention, too: I caught a commercial on TV the other day discussing Takeda Pharmaceuticals' Uloric for gout, and there is also an awareness campaign running with the Arthritis Foundation.
The drug received "orphan status" meaning that it has a 7 year exclusive before a generic can be released. Market value of Krystexxa appears to have a wide range, but $900 Million in five years might be possible. Part of the issue with valuation is that while the market is somewhat limited, the need for the drug is high and treatment could hit the $10-15,000 per patient range. This would force insurance companies to possible pressure doctors for limited prescriptions or for reduced rates. At the 50% haircut that Savient received today, I'm a buyer, (again).
Only you can decide whether Savient belongs in your portfolio, so add it your watchlist and have all the Foolish news and analysis about the stock gathered in one place.
Look for solar stocks to bring some gloom. Solarfun Power, for example, hurt itself by pricing a secondary offering below what the stock previously closed at, and we might keep an eye on Sunpower Holdings (Nasdaq: SPWRA ) , too, because the fourth quarter no longer looks as robust as it once did. After reporting earnings that beat the street, Sunpower Holdings lowered its top-end sales guidance and substantially pulled back non-GAAP profit estimates.
CAPS member wil3714 still thinks that with oil approaching $100 a barrel, alternatives will look better and better, a feeling undoubtedly shared by the more than 1,100 CAPS members who've rated Solarfun to outperform the broad market averages.
Head over to the Solarfun Power CAPS page and let us know what you think.
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.