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 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.
Est. EPS Growth Next Year
|Rentech (NYSE: RTK )||***||$1.50||NM|
|MGM Resorts International (NYSE: MGM )||***||$11.13||NM|
Source: Motley Fool CAPS; Yahoo! Finance. NM = not meaningful. Rentech is projected to go from a profit of $0.10 per share in fiscal 2012 to a $0.02-per-share loss in fiscal 2013. MGM is projected to go from a loss of $0.53 per share in 2011 to a loss of $0.39 per share in 2012.
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.
True growth potential
Some investors may like the prospects for biomass fuels maker Rentech, but don't count me among them. Like solar power and wind, this alt fuel has benefited from government subsidies and tax breaks -- and when they don't come in, it can cause problems. This past summer, Rentech's gasifier project got cut out of the financing loop by the Energy Department, sending its stock barreling lower.
It might have better luck with its ammonia-nitrogen spinoff Rentech Nitrogen, which, like CF Industries and its subsidiary Terra Nitrogen, is looking forward to the coming spring planting season. Fertilizer and crop prices may have finally bottomed out, which could make 2012 a bumper crop.
Ton of cash per share, a majority stake in RNF worth roughly $2.00 per RTK share, and no debt as a result of recent spin off RNF IPO. This is a 3 dollar stock discounted by 50% because of well-founded worries about bad management.
Let us know in the comments section below whether you agree, then add Rentech to your watchlist to see if it can profit from the current environment.
Sin City may have the reputation, but as kids say these days, Macau has the swag. Gambling revenues surged 42% in 2011 for the tiny Chinese island mecca. Gamblers dropped $32.5 billion in the country's only legalized gambling resort, five times more than they did in Vegas' desert oasis.
Casino operator MGM Resorts International may not dominate the Macau landscape yet, but it surpassed analyst expectations in growing its market share there. Las Vegas Sands (NYSE: LVS ) , which also grew market share, is expected to start opening initial phases of its Sands Cotai Central complex, as interest in the Cotai Strip continues to build.
While Macau represents just 30% of MGM's quarterly revenues, we're likely to see that grow much larger soon, as a just-completed study by PricewaterhouseCoopers says the U.S. gambling industry will experience anemic growth of just 5% through 2015.
As CAPS member TMFMT notes, MGM was late in seeing the potential China held, but that makes its market share gains all the more remarkable. It also is one of the reasons I marked the casino operator to outperform on CAPS. Says TMFMT: "Extremely cheap, may be late to party in Asia but due to low P/E, out of the three big boys in Las Vegas, it is the company that has the most future growth potential."
Checking the mercury
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