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 low-rated companies that have recently enjoyed a bump in investor confidence to the top tiers and see whether they're truly heating up -- or headed back to the deep freeze.
CAPS Rating (out of 5)
EPS Growth Next Year
|Boeing (NYSE: BA )||****||$67.46||12%|
|MIPS Technologies (Nasdaq: MIPS )||****||$5.00||53%|
|Six Flags Entertainment (NYSE: SIX )||****||$36.39||(35%)|
Source: 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.
Ready for takeoff
Aircraft maker Boeing is roaring ahead after landing two lucrative deals, most notably a commitment from Indonesia's Lion Air that could be worth as much as $35 billion if it takes all the planes it has optioned for. On top of another deal with Persian Gulf carrier Emirates, which could be worth up to $26 billion for Boeing, the airplane maker is well on its way to retaking its position as king of the jungle.
Although most attention these days has been focused on Boeing's much-maligned Dreamliner, and not always in a good way, now that it's in production the super jumbo jet is proving to be a high-flyer with orders taxiing to takeoff. It's well on its way to meeting its 1,100-jet threshold after which, as the Fool's Rich Smith tells us, it starts producing them at a profit.
That's good news for components makers such as Spirit AeroSystems, which provides much of the parts to Boeing, but it also signals that it's a good time to be an aircraft maker if not a carrier. While AMR (NYSE: AMR ) mulls bankruptcy in its union negotiations, Boeing's rival Airbus is also racking up contract wins.
All that business for Boeing, though, adds up to an investment about to take flight for CAPS member rett448: "[B]acklog, backlog, backlog. They contiue to increase their production rate and still cant keep up with demand."
Solid state of growth
Admittedly, I haven't thought much of MIPS Technologies' management since it began a campaign of overpromising and underdelivering. That also caught the eye of one of its biggest shareholders, Starboard -- and ultimately earned Starboard two seats on the board of directors. But maybe the company is starting to improve.
Last quarter the chip designer beat analyst expectations by posting stronger-than-forecast adjusted profits of $0.05 per share on $17.2 million in revenue. It followed that up with one of those big contract wins we were previously promised but which seemed never to materialize: Sequans Communications (Nasdaq: SQNS ) announced it was switching new products to MIPS from steel cage death match rival ARM (Nasdaq: ARMH ) , marking a good start to MIPS' new LTE chips.
The prospects of having a grownup on the board and a new product line that could generate significant demand seem to warrant the newfound confidence the CAPS community has in MIPS, as 93% of those rating the chip designer thinking it will outperform the market. Add the stock to the Fool's free portfolio tracker to keep track of its progress and see whether it's fit to be included in a real-life portfolio.
A walk in the park
Theme park operator Six Flags Entertainment is entering the quiet season now as the year comes to a close. Its just-concluded third quarter contains the bulk of its revenues, while the first quarter (which runs through the winter) is its weakest. Recent results showed it handily beating analyst forecasts but suffering from a drop in park attendance as it suffered from a lot of the wacky weather, particularly Hurricane Irene, which struck as the season was coming to a close.
Rivals Cedar Fair (NYSE: FUN ) and Great Wolf Resorts didn't have nearly the same problems that Six Flags did, and in fact saw revenues and attendance hitting record levels. Great Wolf ended up raising guidance for the fourth quarter as well as the year. Poor weather or not, all the theme park operators have to contend with consumers struggling in this tumultuous time, and they're all seeing them willing to spend money at their parks.
Earlier this year, I rated Six Flags to outperform the market based on insider buying that was going on, which indicated to me management saw better times ahead. Although its stock chart resembles one of its roller coasters, the theme park maven doesn't seem to be in danger of losing its momentum, and I'll be leaving my outperform pick in place.
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.