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)
|
| AVI BioPharma (Nasdaq: AVII ) |
***
|
$1.99
|
($0.29)-($0.19)
|
| MIPS Technologies (Nasdaq: MIPS ) |
***
|
$12.37
|
$0.51-$0.58
|
| Nektar Therapeutics (Nasdaq: NKTR ) |
***
|
$9.78
|
($0.32)-($0.90)
|
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
Maybe AVI BioPharma got more press than was warranted when fears of the H1N1 flu virus were sweeping the country, as did a number of smallcap biotechs like BioCryst Pharmaceuticals (Nasdaq: BCRX ) and Sinovac Biopharmaceutical. Yet its work on Duchene muscular dystrophy (DMD) might be more valuable for the thousands of sufferers, and its development of treatments for ebola, Marburg, and other infectious diseases shows it's willingness to root around in atypical areas for its novel RNA-based therapeutics.
While any one of those could result in a windfall for the biotech if it's successful, trials take a long time to come to fruition. But it pits it against some larger, better financed rivals like GlaxoSmithKline (NYSE: GSK ) , which is also pursuing therapies for DMD. While it has received government contracts for its work, its work is still at the early stages, and funding could be constrained. Although the payoff for investors could be large if its wins, patience here is required -- and a willingness to accept losses in the meantime.
With 90% of the CAPS member rating AVI BioPharma to ultimately outperform the broad market averages, they seem willing to accept the odds facing them. Wall Street is also fairly bullish about its prospects, too, but you can inject your own thoughts on the AVI BioPharma CAPS page on how successful you think it will be with its therapies for DMD, H1N1, or any other infectious disease.
A glowing opportunity
Despite shares being down almost 20% year to date, MIPS Technologies is going mobile, and the stock may go along for the ride. The chip designer has been inking deals with mobile computing partners, and despite investors becoming unnerved at the dip in such revenues this past quarter, MIPS says it's more of a timing issue, and the current quarter will recognize the deals it signed previously.
Tablet computers and smartphones remain a key driving factor for the chip specialist, and its wins for a number of Android platform designs could represent the start of a significant incursion on ARM Holdings (Nasdaq: ARMH ) territory, which has been the leader in mobile chipsets as Android has supplanted Nokia's Symbian smartphone platform.
PuddinHead42 says the ubiquity of MIPS' technology allows it to support its foray into areas like the Android platform:
MIPS is chip leader in all home consumer products: DVD, set top box, HDTV, dig camera, blu ray. First multithreaded processor chip for smartphone. Android certified, big growth potential.
You can follow along with MIPS Technologies' progress by adding it to your watchlist.
Step into the stream
As 2010 closed out, highly rated CAPS All-Star and biotech guru zzlangerhans remained hopeful that Nektar Therapeutics would be able to use results from its breast cancer and ovarian cancer therapies to overcome the weakness it was exhibiting:
The pullback appears to be due to a rebalancing of demand as more conservative biotech investors depart now that the company has declared their intention of proceeding to phase III trials of NKTR-102 without a partner. For the long-term, sales are likely a better strategy than royalties as long as the company is able to manage their debt with a looming repayment deadline in 2012.
Nektar recently dipped into the equities market raising $220 million by selling 19 million shares to help fund its pipeline of drug development. Though it has agreements in place with AstraZeneca, Amgen (Nasdaq: AMGN ) , and Bayer, the stock took a hit last December when it decided to go solo on a promising cancer treatment.
You can keep track of Nektar's operations by adding the biotech to the Fool's free portfolio tracker, but also provide us with your own insights into how its development program will work out on the Nektar Therapeutics CAPS page.
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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