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.
EPS Estimates (This Year-Next Year)
|KIT digital (Nasdaq: KITD )||***||$11.51||$0.08-$1.08|
|Questcor Pharmaceuticals (Nasdaq: QCOR )||***||$20.92||$0.73-$1.16|
|Thoratec (Nasdaq: THOR )||***||$34.65||$1.27-$1.46|
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.
The world's hottest videos
It's no surprise that video is the next frontier for content. For example, while blogging is still big, video blogging -- or vlogging is gaining momentum. BlogTV is one outlet combining vlogging with instant messaging to create a new level of interactive experience. Netflix (Nasdaq: NFLX ) might be the best representation yet of the positive experience consumers have of video on demand.
KIT digital seeks to fully embrace this new wave of videography by providing end-to-end solutions via a cloud-based software-as-a-service. For example, it helped package the royal wedding simultaneously across multiple types of IP-enabled devices, such as TVs, mobile phones, tablets, and computers. It's no longer going to be enough to deliver the written word; video will have to be incorporated as well.
KIT's technology allows clients -- from Fortune 500 companies like Coca-Cola to leading wedding destination site The Knot -- to produce, manage and deliver highly engaging multi-screen video experiences to audiences wherever they are while allowing them to generate new streams of revenue.
As exciting as this sounds, I have one of the leading CAPS scores on KIT because I gave it the thumbs-down last November over concerns with management diluting existing shareholders. The company's share count has risen from 4.8 million shares in June 2009 to almost 40 million in its most recent quarterly filing. Share count has risen by two-thirds just since last September.
Let us know on the KIT digital CAPS page whether the market opportunity for video on demand outweighs the heavy discounting current shareholders have to endure.
Last month, The Wall Street Journal raised concerns over whether the high price of Questcor Pharmaceuticals' top drug, Acthar, which is used to treat multiple sclerosis and has been approved by the Food and Drug Administration for treatment of infantile spasms, would cause it to stumble because of Medicaid rebate requests from the government in the wake of health-care reform.
Apparently, those concerns haven't slowed the company down. Prescriptions for Acthar more than doubled in the quarter, generating 40% higher revenues for Questcor. Its reserves for the rebates represent less than a quarter of the nearly $50 million in gross sales it generated.
Acthar also faces competition from Solu-Medrol, an MS drug produced by Pfizer (NYSE: PFE ) , and Lundbeck's Sabril, which tackles it in the infantile spasm market. But 91% of CAPS members rating Questcor think it can go on to beat the Street in the quarters ahead, so add the pharmaceutical to the Fool's free portfolio tracker and give us a dose of your thinking on its prospects at the Questcor Pharmaceuticals CAPS page.
Revenge is a dish best served cold
Living well is the best revenge, they say, and Thoratec may be playing that out. Earlier this year, analysts at JPMorgan Chase reiterated a neutral rating after the medical devices maker made an apparently uninspiring presentation at a health-care conference and emerging competition from the likes of Heartware International (Nasdaq: HTWR ) , which was coming to market with smaller, less-invasive pumps.
But Thoratec is still the industry leader with products actually on the market. The risk of betting on unproven devices was borne out when data was released showing Heartware's mechanical heart-assist device increasing the risk of heart-pump-related thrombosis. It might still make it to market, but Thoratec's much lower level risk will allow it to continue commanding a premium.
Shares of Thoratec have rebounded more than 50% from the lows they hit in February, and 86% of the CAPS members rating the medical device maker believe shares will continue to outperform the broad indexes. Head over to the Thoratec CAPS page and pump up the opinions 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.