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)

BSD Medical (Nasdaq: BSDM  )

****

$4.60

($0.24)-($0.20)

Keryx Biopharmaceuticals (Nasdaq: KERX  )

***

$4.56

($0.32)-($0.43)

Zix (Nasdaq: ZIXI  )

***

$4.25

$0.08-$0.12

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
I'll admit to underestimating the potential BSD Medical represents. Its thermal ablation technology has gained traction, and the development of the latest generation MicroThermX Microwave Ablation product line is starting to gain adherents.

That doesn't mean, though, it's necessarily a good investment at this point. Although its technology appears advanced beyond what Boston Scientific (NYSE: BSX  ) and AngioDynamics (Nasdaq: ANGO  ) offer, BSD itself hasn't been very shareholder friendly, diluting shares every chance it gets when the stock jumps in price.

Investors, though, are willing to overlook the dilution if it ultimately means the company grows sales down the road. Almost 95% of the CAPS members rating BSD mark it for outperformance, and rolman80 believes its thermal ablation technology will facilitate that.

As the population ages the need for cancer treatment will increase. From what I have researched, this technology coupled with chemo, or radiation has a big impact on the destruction of cancer cells and increasing longivity of the patient.

Let us know in the comments section below or on the BSD Medical CAPS page just how hot you think this stock can get.

Ups and downs
Keryx Biopharmaceuticals beat a pair of drums to greater growth in 2010: perifosine to treat advanced colorectal cancer and Zenerex to treat hyperphosphatemia in dialysis patients. The former, which it licenses from Aeterna Zentaris (Nasdaq: AEZS  ) , received fast-track status and an orphan drug designation. The latter generated positive phase 3 trial data and looks to improve on a similar treatment developed by Genzyme (Nasdaq: GENZ  ) .

CAPS member JuanPeter figures Keryx's stock is going to be a roller-coaster ride, as there is still a lot of time before final data are released. Yet with shares off their recent highs, it's a good time to get in.

After presenting positive top-line results of its short term trial, Keryx will probably be subject to the typical ups and downs amid some PR releases and things like that. With no major catalysts until 2012, I would wait for a decrease on the price to press the "buy" button.

If you're not sure whether Keryx belongs in your portfolio, add it to your watchlist to keep an eye on its progress.

Zip it!
While the WikiLeaks drama undoubtedly highlighted the need for secure email encryption -- services such as that provided by Zix -- the real key for the company's growth will be the federal and state regulations requiring protections for information in transit. Sales climbed 15% last quarter as it signed on the Alcohol and Tobacco Tax and Trade Bureau and convinced a Blue Cross Blue Shield organization to switch service providers.

With the need for secure communications, particularly in the health-care field, CAPS member SIO394 likes its prospects for at least the short term.

This is a ride up, and I'm in at $3.80. e-communication services that connect enterprises and consumers in the health care field is a necessity today. We all need to have sensitive information protected, it's our right of privacy and this company is protecting our health information. I like it in the short term.

Add Zix to your watchlist to have all the Foolish news and analysis compiled in one location, then head over to the Zix CAPS page and explain why this growing small cap could break the code of huge growth.

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.

Try any of our Foolish newsletter services free for 30 days. We Fools may not 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 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.


Read/Post Comments (2) | Recommend This Article (10)

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 January 05, 2011, at 2:56 PM, robmxa wrote:

    Would like to know why you think that thermal ablation is better than ANGO's Nanoknife. My research as a cancer patient is strongly in favor of the Nanoknife. I am not a candidate for cryo or thermal but it seems Nano may be OK, more selective.

  • Report this Comment On January 05, 2011, at 5:06 PM, ash008 wrote:

    Good article, Rich, but this posting from the Zix Yahoo board gives an accurate thumbnail of Zix earnings for the year and for next year. These numbers are very accurate. Thanks for the post.

    Zix long term investor.

    "we already know that Z did an adjusted EPS of .02 in Q1, .03 in Q2 an .04 in Q3

    with the revised total year guidance, frankly, we already know that Q4 will be .04 too (remember, 90% of quarterly revs are known BEFORE the quarter even starts, due to revs being the trailing indicator)

    so with adjusted 2010 EPS of .13, that equates to a 2010 P/E of 25.7X

    as for 2011 (the real measuring stick at this time), the quarterly adjusted EPS will very likely be .04 for Qs 1 and 2, and .05, for Qs 3 and 4, for a total 2011 adjusted EPS of .18.

    My personal estimates for 2011 is .23 but that is more recent than this post.

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