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.
(out of 5)
Estimated EPS Growth Next Year
|Capstone Turbine (Nasdaq: CPST )
|iShares Silver Trust (NYSE: SLV )
|Motricity (Nasdaq: MOTR )
Source: Motley Fool CAPS; Yahoo! Finance. NA = not available.
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.
Will this stock generate some heat?
Strong revenue growth at microturbine maker Capstone Turbine is fueling investors' hopes that it will prove successful. Last quarter, I asked if investors had the patience to wait out the loss-producing period it was going through, and it doesn't seem they do. Shares are almost 30% lower than where they were in mid-June.
While Capstone saw revenues jump 51% from the year-ago period, to $24.3 million, they still fell short of expectations, which pegged sales at more than $25 million. It also turned a break-even quarter last year into a loss-making one this time around. Antidilutive warrant liabilities played havoc with its results, though, and it would have recorded a $0.04-per-share loss last year were it not for the warrants. Of course, this year's results would have been a lot worse had it not recorded the benefit, too.
Capstone's technology finds itself competing against other technologies -- such as fuel cells and solar- and wind-powered systems -- that have benefited from high government subsidies. FuelCell Energy (Nasdaq: FCEL ) and Ballard Power are just two of those seeking to gain an upper hand.
CAPS member Indiscr33t isn't so worried, believing the company's work in the shale gas areas of the Eagle Ford and Marcellus regions will put it ahead of the competition:
Say what you want, but Capstone technology is going to dominate shale gas decentralized energy production. With that in mind, their margins will continue to expand as their premium products, despite being more expensive than GE or CAT engines, are being bought nonetheless by [international energy giants].
Go to the Capstone Turbine CAPS page and let your fellow Fools know your views on whether it can generate enough investor interest to survive.
Betting on the Bernanke
One of the strongest cases for gold bullishness is the prospect of Fed Chairman Ben Bernanke starting up the printing presses again to combat the sustained malaise of the U.S. economy through a third round of quantitative easing. He hasn't done it yet, but markets are on tenterhooks anticipating this Friday's address to the world's central bankers, the same forum at which he unveiled QE2 last year.
Silver has similar pressure building up, but because of its industrial uses, silver and its index, the iShares Silver Trust, might not react in the same fashion as gold or other commodities. A better bet for investors looking for exposure to the gray metal might be through Silver Wheaton (NYSE: SLW ) , which takes possession of the streams of silver producer by miners to sell into the market.
Highly rated CAPS All-Star Chemdawg thinks an investor can still do well buying shares of the trust, as the long-term case for rising silver prices remains intact, but you can tell us on the iShares Silver Trust CAPS page whether there's too much risk to tackle head-on here.
Who's at the top?
Investors unhappy with the long skein suffered by Motricity shares have been itching for a management change to shake things up. The company was already on the lookout for a new CFO, as well as someone to replace the chief marketing officer. Motricity helps carriers like Verizon (NYSE: VZ ) and AT&T provide entry-level feature phones with various levels of third-party content and applications, though sales haven't met expectations.
While some sort of "transition plan" was already in place at the CEO level, the board of directors got things going in a hurry and booted Ryan Wuerch from his front-office perch this week. That might have been a little more sudden than what the market was expecting, as the stock jumped initially, but then plunged, losing as much as 12% in intraday trading Monday.
With 88% of the CAPS members rating Motricity marking it to outperform the market indexes, it could be they agree with Leonidas007 about the importance of its owning spectrum, which should put a floor on the company's valuation. Add your own thoughts on the Motricity CAPS page on whether this was the right move at the right time.
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.