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
|
| Cooper Tire & Rubber (NYSE: CTB ) |
*** |
$14.27 |
45% |
| Huntington Bancshares (Nasdaq: HBAN ) |
*** |
$5.25 |
2% |
| Samson Oil & Gas (NYSE: SSN ) |
*** |
$2.35 |
NA |
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.
Caution: Contents may be hot
The "Cash for Clunkers" program is partly responsible for Cooper Tire & Rubber's poor quarterly results. Almost three-quarters of the tire maker's revenues come from the North American replacement tire market, which is more dependent on the sale of used cars than new. But because the misguided Clunker program drained the market of usable used cars -- remember, the cars had to be scrapped -- there's actually a shortage of used cars on the street. According to analysts at JPMorgan Chase, the dearth of cars has caused used car prices to rise to their highest level in five years.
Cooper reported a 19% increase in revenues in the quarter, or $171 million, but $158 million of that increase, or 92%, can be attributed to higher prices charged for its tires. Yet that still wasn't enough to offset soaring raw materials costs, which at $194 million outpaced the price hikes. Profits cratered 61% as a result.
Goodyear Tire (NYSE: GT ) , on the other hand, was able to use its market muscle to push through price hikes that exceeded its materials costs, allowing it to post results that beat analyst expectations on the top and bottom line. Because it sells higher-end specialty tires, it had a stronger showing than the more plain vanilla replacement tires Cooper sells.
CAPS All-Star kkconway thought Cooper's stock was oversold before the earnings report came out, but even management is worried about how well the U.S. markets can hold up in light of volatile commodity costs. Share your thoughts on the Cooper Tire & Rubber CAPS page, then put the stock on your watchlist to keep track of its progress.
Solid state of growth
Regional banking pro Huntington Bancshares reported a third-quarter profit of $143.4 million, up from $100.9 million a year earlier as its loan-loss provisions were slashed by two-thirds, dropping to $43.6 million, from $119.2 million in the year-ago period. At the same time, it started loaning more money, increasing consumer loans by more than 5%.
The problem for Huntington and other regional and local banks, including Regions Financial (NYSE: RF ) and Fifth Third Bancorp (Nasdaq: FITB ) , is the damaging, low-interest-rate policy the Fed continues to pursue. "Operation Twist" is squeezing the profits from the banks. Huntington reported that its interest margin -- the difference between the funds borrowed by a bank and the money it lends out -- fell six basis points in the quarter, much lower than it had expected, and was likely to stay below its target range because of the Fed's policy.
Yet the worst appears to be behind Huntington's operations, and 80% of the CAPS members rating the regional bank now see it as being able to beat the market. Add the stock to the Fool's free portfolio tracker to keep track of its progress and see whether it's still fit to be included in a real-life portfolio.
A towering opportunity
After selling off its Greater Green River Basin properties in Wyoming to Chesapeake Energy (NYSE: CHK ) , Samson Oil & Gas paid off its debt and bolstered the cash it has sitting in the bank, making for a very nimble operator. It has focused more on liquids, doubling oil production while being able to keep costs low because more than 90% of existing reserves have already been developed.
With the market making it one of the lowest-valued stocks in the Bakken, and arguably one with some of the best potential, it's not surprising that investors like CAPS member bdescent think some other player might want to buy it out:
One of the best small cap energy plays out there and the bonus is that it is in the Bakken with a clean balance sheet. One should never buy a security based on buyout potential but this is one exception IMO.
Samson flies under Wall Street's radar, making this a choice opportunity to buy in before everyone notices. Of the 222 CAPS members who have registered opinion on this Bakken play, almost 90% look for it to beat the broad market indexes. You can let us know your opinion on the Samson Oil & Gas CAPS page while adding the stock to your watchlist to keep close tabs on its progress.
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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