These Cold Stocks Are 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 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)

LDK Solar (NYSE: LDK  )

***

$10.31

$1.72-$2.06

Microvision (Nasdaq: MVIS  )

***

$1.95

($0.46)-($0.38)

Solarfun Power (Nasdaq: SOLF  )

***

$8.42

$1.33-$1.72

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 pay attention, too. 

Caution: Contents may be hot
Get used to seeing shares of Chinese stocks trading lower. LDK Solar and Solarfun Power were each down by almost 2% yesterday as the government raised interest rates for the second time in two months on Christmas Day, in an effort to cap rising inflation. Overnight, however, the Shanghai Index fell by another 1.7% and Hong Kong's Hang Seng dropped by 0.9%.

There's growing concern that the rate increases won't be enough to slow inflation and that additional rate increases are going to be necessary. Bank lending continues to keep the money flowing into the Chinese economy, and a bigger-than-expected trade surplus last month is priming an already overheated economy.

Chinese stocks are going to be feeling the brunt of the move, and solar stocks are just one pinch point. Canadian Solar (Nasdaq: CSIQ  ) was down by more than 2% yesterday, and JA Solar (Nasdaq: JASO  ) fell by almost 3%. But the trend will be widespread across industries. Universal Travel Group (NYSE: UTA  ) was off by 3.7%, and Nam Tai Electronics fell by a little more than 3%.

Of course, focusing just on macro issues ignores what the individual businesses are doing. LDK, for example, just announced that it has reached the milestone of 3 gigawatts of annualized capacity at its wafer plants. Solarfun, which is changing its name to Hanwha Solar One to reflect the investment by a South Korean chemical firm that bought half the company, is expanding in Italy with two new big contracts.

CAPS member Aristocrisis sees the stock of LDK Solar suffering from events beyond its control.

This is simply a growth-stock. It could match Apples growth many times over, but solar is so un-hyped right now that stocks are plunging on good news. Seems like an excellent entry point (@10.40).

Similarly, SIO394 believes the selloff in Solarfun Power's shares over the past month -- it's down by more than 8% -- is a chance to get shares at a good discount.

Recent drop in the past month gives some opportunity. Earnings report was good and for a solar play it's worth a shot but also one to keep an eye on. I'm in at $8.48 today.

Let us know in the comments section below whether macroeconomic events will continue to cloud solar's future.

A spectral projection
Here we go again. Miniature-projector maker Microvision is benefiting from the speculation that Apple (Nasdaq: AAPL  ) will include projectors in its next iteration of iPhones, iPads, and iPods. That's been an on-and-off-again rumor that has jerked the stock around previously, so investors might not want to put too much stock in the rumor mill again this time.

CAPS member thakillyou says Microvision really needs to find a ready market for its projectors soon, or else it's not going anywhere. To that end, the deal it just announced with Pioneer to have the consumer-electronics company agree to put the pico projectors into some of its products ought to help.

If you're not sure whether Microvision belongs in your portfolio, add it your watchlist and have all the Foolish news and analysis about the stock aggregated in one place. Then head over to the Microvision CAPS page and project your thoughts about its future.

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.

Apple is a Motley Fool Stock Advisor recommendation. Nam Tai Electronics is a Motley Fool Global Gains selection. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey currently has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 29, 2010, at 10:25 AM, 8martini8 wrote:

    With regard to Microvision, I believe you meant "Pioneer" -- not Panasonic -- yes? You're going to set the fools over on the Yahoo! Board into an orgy of speculation with a slip like this . . .

  • Report this Comment On December 29, 2010, at 11:03 AM, TMFCop wrote:

    Thanks for catching that...I'll get it corrected ASAP.

    Rich

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