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.

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. 

Get a charge out of this
Last week, an analyst downgraded lithium-ion battery maker A123 Systems, saying the industry wouldn't generate enough electric car sales to let the company turn a profit any time soon. Consider that Nissan's (Nasdaq: NSANY) Leaf and the General Motors (NYSE: GM) Volt, arguably the two biggest names in electric vehicles right now, have sold a grand total of 4,351 cars this year through May. Chevy sold fewer than 500 Volts in May. Despite the hoopla -- and the tax money spent -- demand for electric cars doesn't seem to exist.

A Morgan Stanley analyst sees things differently, causing A123's stock to jump more than 10% yesterday. The analyst sees volume increases coming soon as its customer carmakers ramp up production, and argues that a new contract with an unnamed U.S. carmaker for the 2013 model year should indicate a brighter future. With sufficient cash on hand, A123 is not facing any financial crises right now.

CAPS member mjs504 was ahead of Wall Street here:

A123 is poised to end the label of speculation and enter real profitability. I believe most of the downside risk has been reduced or eliminated with their recent stock price offering of $254 million, which will provide enough cash to sustain ramping up plant production in the near term. The stars are aligned for A123 to finally reach its potential.

Let us know on the A123 Systems CAPS page whether the market opportunity for electric cars will ever be enough to charge up the stock again.

Radiating outward
The primary catalyst for biotech Cleveland BioLabs lies in getting its radiation drug Protectan approved for defense purposes. The company is developing treatments to stave off death after a total-body irradiation incident, which helps explain the spike the stock enjoyed following Japan's nuclear reactor crisis. There are fewer hoops to jump through in getting the therapy approved for those purposes, which may explain why investors were hugely disappointed when the Biomedical Advanced Research and Development Authority (BARDA) requested additional information. Delays cost money, since they also push back funding for the company.

CAPS members might instead consider the medical uses of Protectan, since proponents suggest it might also ease the side effects of chemotherapy treatments in cancer patients. But the hurdles for regulatory approval are much higher there, and the medical radiation-protection market is dominated by AstraZeneca's (NYSE: AZN) Ethyol.

CAPS member Dynablob believed earlier this year that Protectan would win approval eventually:

Asymmetric risk/reward. BARDA grant would further legitimize science behind 502, leading to domestic & international government orders. Total market size should be $300-$500 million for the drug, and CBLI should get good margins on a large order.

Add the biotech to the Fool's free portfolio tracker, and give us a dose of your thinking on its prospects at the Cleveland BioLabs CAPS page.

No pain, no gain
A patent challenge to its diabetes drug Glumetza just the latest speed bump DepoMed has encountered, even as it tries to bring its post-herpetic neuralgia drug Gralise to market.

Previously, its partner Abbott Labs (NYSE: ABT) declined to bring Gralise to market, despite getting FDA approval. Then DepoMed's CEO up and quit for "personal reasons." Now the drugmaker says Sun Pharmaceuticals is challenging its patents to bring a generic of Glumetza to market. DepoMed is already waging an infringement suit against fellow rival Lupin, which also wants to offer a generic version of the drug.

Highly rated CAPS All-Star HealthcareGuy thinks DepoMed can still relieve investors' pain:

ABT terminating partnership, and CEO quitting do raise flags, but too many favorable catalysts ahead relative to mkt cap to close this one out yet, can still hit $20 IMO

Head over to the DepoMed CAPS page and give your own opinion on 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.

Editor's note: A previous version of this article erroneously applied disputes surrounding DepoMed's drug Glumetza to its efforts to release another drug, Gralise. The Fool regrets the error.