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.
|
Company
|
CAPS Rating (out of 5)
|
Recent Price
|
EPS Growth Next Year
|
| Dean Foods (NYSE: DF ) |
**** |
$9.64 |
24% |
| Dendreon (Nasdaq: DNDN ) |
** |
$8.06 |
50% |
| Genco Shipping & Tranding (NYSE: GNK ) |
**** |
$7.37 |
(264%) |
Sources: 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
We're not likely to see Russian president Vladimir Putin wearing a white mustache and asking his people, "Got milk?" but we may see Russia, China, and many other foreign markets becoming a more important destination for U.S. dairy products.
Three years after China's melamine milk scandal rocked producers like Synutra (NYSE: SYUT ) , analysts says it's cheaper for the country to import its milk needs than increase production on its own. According to Wisconsin's farm bureau, U.S. dairy exports accounted for 15% of production over the past few years, but that figure could double in the near future.
Exports don't account for very much in Dean Foods' total revenue scheme, just $374 million out of almost $13 billion in trailing sales, but that just means it represents an untapped source of new growth for one of the U.S.'s biggest dairy processors. Butterfat and skim prices have been at some of their highest levels ever this year as a result of limited supply and high international demand, though Dean expects prices to ease up somewhat going forward.
More than 90% of the CAPS members rating Dean Foods think the dairy processor has not only got milk, but also has what's necessary to beat the broad market indexes. Let us know in the comments section below or on the Dean Foods CAPS page whether you think it can avoid being a spoilsport in the milk market, then add it to your watchlist to see whether it pulls it off.
A painful realization
It's no longer enough to get FDA approval for a best-of-breed drug to ensure sharp sales growth, at least not when you're charging a premium for the privilege. Dendreon was thought to have a hit on its hands in the form of cancer treatment Provenge, but when it charged $93,000 for the full treatment regimen -- and doctors had to shell out the cash ahead of time -- it quickly became a tough sell.
Now it becomes a game of re-education for Dendreon. The Centers for Medicare and Medicaid Services has changed its reimbursement policies so doctors can be assured of getting their money back, but it's lost precious time. There's a short window of opportunity to capitalize on your exclusivity in the marketplace, and with additional prostate cancer drugs from Exelixis (Nasdaq: EXEL ) and Medivation (Nasdaq: MDVN ) coming to market soon, that window is slamming shut.
Highly rated CAPS All-Star DarthMaul09 thinks Dendreon squandered its chance and now its best hope lies in a buyout: "Independent of how potentially beneficial a new drug may initially appear, there will be a slow acceptance of any treatment that cannot compete on the basis of cost. In this environment their best hope is that their stock price continues to fall to a level where a larger pharm company buys them out for their patents."
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 towering opportunity
The shipping industry looks like the wreck of the Hesperus these days, ground down on the shoals of an inventory glut every bit as dangerous as Norman's Woe. Genco Shipping & Trading just might be able to sail off on calmer seas, though, as third-quarter results show it capitalizing on an improving spot-market pricing environment. It topped analyst expectations (though down sharply from the year-ago period) as earnings on vessels trading on spot-market-related charters benefited from an increase in prices during the last month of the quarter.
Similar rough waters, though, are threatening to swamp tanker operator Frontline (NYSE: FRO ) , which recently said that if conditions in the industry didn't improve soon, it just might run out of money.
Almost 96% of the 1,223 CAPS members rating Genco see it riding high on the tidal wave of calamity in the industry, expecting it to beat out the broad market averages. You can let us know your opinion on the Genco Shipping & Trading 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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