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 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 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)
|
| China Agritech (Nasdaq: CAGC ) |
***
|
$11.27
|
$1.00 - NA
|
| Brigus Gold (NYSE: BRD ) |
***
|
$1.88
|
NA - NA
|
| Rentech (NYSE: RTK ) |
***
|
$1.24
|
($0.07) - ($0.08)
|
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
By appointing the China subsidiary of accounting giant Ernst & Young, China Agritech tackled at least half the problems that caused its stock to tank. In September, analysts questioned the organic fertilizer maker's relationship with its previous auditor, and shares tumbled as there have simply been too many questionable companies coming out of China these days. Investors are right to be skittish about whether any of the financials associated with Chinese small-cap stocks are reliable.
Yet with a Big Four accounting firm on board, China Agritech now has to tackle the quality of its earnings, which have also served as a drag on performance. Revenues and profits plummeted in the third quarter as torrential flooding destroyed crops, but also because it scaled back its practice of selling fertilizer on credit to its customers. Receivables soared 34% year-over-year and are up 54% since the start of 2010. AgFeed Industries (Nasdaq: FEED ) also saw receivables get away from it and was forced to curtail the practice.
Plant and animal feed maker Yongye International (Nasdaq: YONG ) hasn't been hurt nearly so much as its rivals and will prove a formidable competitor, though investors may hope that as farmers struggle to recover, they'll turn to China Agritech's fertilizer to get up and running again. More than 91% of the CAPS members rating China Agritech believe it will outperform the market.
Let us know in the comments section below or on the China Agritech CAPS page whether it will be a stock that can put down roots once again.
Golden globes
Gold futures have had an extraordinary run this year, rising 25% and marking their 10th consecutive annual increase. Yet after hitting a record $1,432 an ounce at the beginning of the month, the precious metal has given back some of those gains as the dollar strengthened. Still, at $1,379 an ounce, it remains at elevated levels, and analysts expect it to go higher still in 2011.
Those higher prices are causing gold producers to boost production plans. According to a survey by PriceWaterhouseCoopers, 82% of gold producers are looking to increase production next year. Agnico-Eagle Mines (NYSE: AEM ) is looking to hike production by as much as 18%.
That's good news for CAPS investor Brigus Gold, since come Dec. 31 it will become a small, growing, but unhedged gold producer. Up until now, performance was held back due to hedging activities that priced gold at just $876 an ounce. It used some financing maneuvers a few months ago to reduce its debt and completely eliminated its hedges. That should make its wholly owned Black Fox Mine in Ontario an attractive proposition as it will sell its gold at spot prices while cash costs will be in the range of $500 to $550 an ounce.
Barrick Gold (NYSE: ABX ) , AngloGold Ashanti, and others also eliminated their hedge books this year.
With other projects in development as well, Brigus could very well earn the accolades that the CAPS community has bestowed on it. While the company is still generally unknown to the market, 96% of those rating the junior miner think it will turn in market-beating performances.
If you're not sure whether Brigus belongs in your portfolio, add it your watchlist and have all the Foolish news and analysis about the stock aggregated in one place.
A sea of red in green
After scoring deals with the military and a number of airlines to test out its proprietary biomass output, green tech specialist Rentech had investors hoping the business would soon turn profitable. But lower selling prices continue to pressure operations, and despite record-high product margins, Rentech disappointed Wall Street once again.
CAPS member VincentChang is certainly disappointed that it can't turn a profit, but 87% of the CAPS members rating the clean tech leader think it will outperform the broad market averages. Head over to the Rentech CAPS page and let us know if you think the stock will remain on standby.
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.
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