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
|
| Cymer (Nasdaq: CYMI ) |
***
|
$46.66
|
18%
|
| Magnum Hunter Resources (NYSE: MHR ) |
***
|
$7.53
|
375%
|
| Micromet (Nasdaq: MITI ) |
***
|
$6.05
|
(13%)
|
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
Semiconductor-equipment company Cymer experienced something of a "flash crash" last week, after reporting earnings that caused its stock to plummet, before turning around and closing the day at a small gain.
Cymer makes light sources used by chipmakers to create advanced semiconductor chips, and it was a beneficiary in the second quarter of higher capital spending by chipmakers. Back in January, when Intel (Nasdaq: INTC ) said it was going to be increasing its capex this year, Cymer, ASML Holdings, and other equipment makers were all buoyed by the decision.
What seems to have spooked Cymer investors was its announcement that it expected to ship a significantly reduced number of deep-ultraviolet light sources in the third quarter. ASML, which is a Cymer customer, said it expected European customers to hold back on spending next quarter.
While 85% of the CAPS members rating Cymer think it will outperform the broad market averages, 94% of the All-Stars think it will, and all but one Wall Street analyst concurs. Let us know on the Cymer CAPS page whether you think it will light the way to higher growth.
Not so easy
With assets in some of the shale plays that present the biggest opportunities, Magnum Hunter Resources looks well positioned to capitalize on rising oil prices. The Eagle Ford, Marcellus, and Bakken shale regions are attracting heavy interest, such as BHP Billiton's (NYSE: BHP ) decision to buy Petrohawk Energy because of its holdings in the Eagle Ford, and Marathon Oil's (NYSE: MRO ) large acreage purchase there.
Magnum just updated its proven oil and gas reserves and reported that they've more than tripled from the end of last year. Equally important, Magnum's PV-10 value -- an arcane calculation that oil and gas companies use to estimate future gross revenue to be generated from the production of proven reserves, minus the costs associated with production and future development and then discounted at a 10% rate -- jumped 141% during the same period.
CAPS member Benl324 sees Magnum Hunter as an up-and-coming name worth keeping an eye on: "It is a young gun in the oil industry and I believe it has nowhere to go but up considering the oil and gas boom that has been happening in this country."
You can drill down further on the Magnum Hunter Resources CAPS page and track its progress by adding the stock to the Fool's free portfolio tracker.
A deal with some teeth
Biopharmaceutical Micromet was able to get Amgen (Nasdaq: AMGN ) to bite off more than a mouthful for its BiTE antibody technology that could be worth nearly $1 billion. But as the Fool's Brian Orelli notes, it's going to take some time before Micromet gets all that money, and it's going to have to perform well to realize the full potential.
The payments will come in bite-sized morsels. The biopharmaceutical gets $14 million up front, and if it develops a second target it will get another $35 million. An additional $480 million could be forthcoming if it achieves some clinical and commercial milestones with royalties received after marketing approval.
The market responded favorably to the deal, but the excitement wore off rather quickly as it became apparent that much of the money would arrive later on. That reaction seems shortsighted, since Amgen is picking up much of the tab for the development. So long as Micromet's BiTE technology lives up to its promise, it ought to realize a good portion of those payments.
CAPS member idvst8 thinks there's even the potential for a twist before then: "MITI - Offer huge upside in the BioTech sector. I firmly believe this company will get bought out in the next 12-24 months."
Nibble on the other opinions of this biopharmaceutical and add your own on the Micromet CAPS page, where you can let us know whether you think it will be an investment that melts in your mouth.
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.
RSS Headlines
Fool UK