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 180,000-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 Growth Next Year
|
| China Yuchai (NYSE: CYD ) |
***
|
$20.16
|
NA
|
| Curis (Nasdaq: CRIS ) |
***
|
$3.82
|
67%
|
| Claude Resources (NYSE: CGR ) |
***
|
$2.10
|
20%
|
Sources: Motley Fool CAPS;,Yahoo! Finance.
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
Oh, thank goodness! China's GDP numbers came out, and at 9.5% growth they slightly exceeded expectations. That means the party's back on! The stock market sprang to life again today … which all goes to proving just how uninspiring and dangerous the rest of the world's economies are. So long as we can still sell into China, maybe we'll get over this hump. Whatever it says about U.S. companies (and it's not good), China's numbers show that the muscular economy is still going strong for many of its manufacturing sectors, including autos, which is good news for engine maker China Yuchai.
It's been the subject of doubt for awhile, as analysts wondered whether it or diesel-engine maker Cummins (NYSE: CMI ) could overcome the government's attempt to cool off the economy. It now appears it will make a soft landing, a better outcome for businesses with expansive exposure to China, like the miners Cliffs Natural Resources (NYSE: CLF ) and Vale.
With 91% of the 380 CAPS members who've rated China Yuchai saying it will outperform the market averages, it appears they see it easing up on the gas rather than slamming on the brakes. Let us know on the China Yuchai CAPS page whether it's hitching a ride with the engine maker.
Not so easy
Cancer-drug developer Curis has enjoyed a big ride up over the past year, with its stock soaring 150%, a result of positive drug trials. The markets are expecting the good news to continue. In particular, Roche -- its partner on vismodegib, a treatment for advanced basal cell carcinoma -- is seeking quick FDA approval.
Therein lies the opportunity, though not in the way you might think. As the Fool's Brian Orelli points out, the FDA has a decidedly conservative bent these days, and Roche's track record is rather weak when attempting an end run around the longer approval process. Trastuzumab-DM1, a cancer drug Roche was developing with ImmunoGen, got shot down last year for not testing against the right patient population.
What Roche is doing now is going before the FDA with positive data that didn't go up against a control group. That might spell trouble and lead the agency to require controlled testing. That's where I see the opportunity. If Roche's bid is shot down, Curis shares will probably fall, but because the results have been so positive with vismodegib, success later on is probable. The market would be giving investors a chance to get a discount on an exciting biotech opportunity.
Wall Street thinks it can beat the market, as does the CAPS community, where 94% of those rating the drug developer see it surpassing the broad market averages. You can diagnose the situation on the Curis CAPS page and track its progress by adding the stock to the Fool's free portfolio tracker.
No pain, no gain
There was already a lot of hope built into Claude Resources' Amisk gold project, based at a Manitoba mine with 921,000 indicated gold-equivalent ounces. But it had only a 35% interest in the project.
Not so anymore. Claude approached partner St. Eugene Mining about a stock swap that would give it full ownership of the project, as well as its 100%-owned Tartan Lake Gold project in Flin Flon, Manitoba.
The Fool's precious-metals guru, Christopher Barker, notes that there are a lot of exciting gold discoveries to be found amongst the likes of Rubicon Minerals (NYSE: RBY ) and Northgate Minerals (NYSE: NXG ) . Junior miner Claude has potential as well, and highly rated CAPS All-Star reggidmalc sees it offering investors high returns: "Small producer (= cashflow) with some outstanding gold properties, including one in the famous Red Lake District next to GG and RBY. Looking for a multi-bagger here."
Dig in to the other opinions, and add your own on the Claude Resources CAPS page. Let us know whether you think it will be worth its weight in gold.
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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