Think of investor sentiment as a pendulum that swings in tandem with a company's share price. When investors begin to think highly of your company, its stock might also start heading in the right direction. Alas, you can rarely tell when investors are warming to a stock until after it's made that upward swing.
An astrolabe for investors
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 84,000-plus investors, offer a great way to monitor investor sentiment. Like astronomers scanning the skies, investors can follow a stock's stars through its CAPS rating trend, tracking investor sentiment to help determine the best time to invest. Let's look at recently one- or two-star-rated companies that have enjoyed a bump in investor confidence, and see whether the stars are really aligning in their favor.
|
Company
|
CAPS Rating (out of 5)
|
Recent Price
|
1-Year Return
|
|
Zoran (Nasdaq: ZRAN)
|
***
|
$13.48
|
(22.4%)
|
|
Atmel (Nasdaq: ATML)
|
***
|
$3.33
|
(42.3%)
|
|
LSI (NYSE: LSI)
|
***
|
$5.04
|
(48.2%)
|
|
Chico
's FAS (NYSE: CHS)
|
***
|
$9.87
|
(57.4%)
|
|
Coldwater Creek (Nasdaq: CWTR)
|
***
|
$5.34
|
(72.4%)
|
Sources: Motley Fool CAPS and Yahoo! Finance.
Obviously, this is not a list of stocks to buy -- just a starting point for further research. Still, consider the case of contract R&D firm Symyx (Nasdaq: SMMX) (which appeared last week, too). Although CAPS investors seemingly held the stock in low regard for a while, beginning with the start of the new year, they began marking the company up even as its stock drifted lower. Yet after reaching a low point toward the end of January, the stock has been moving up, and now CAPS investors are looking up once again.
Tarnished fashion plate
It's not surprising that we find two retailers at the bottom of the performance list. If homebuilders showed any hope at all for investors, they'd probably be the only ones lower. It's also not surprising that retail stocks haven't been liked by investors, either. As the economy has worsened and consumers have tightened their purse strings, clothiers have found that their customers will make do with what they have instead of buying new.
Chico's is one of the companies that experienced the harshest drop-off in same-store sales last month, as comps fell 22% from last year. Overall sales during the month were also anemic, falling 25% to $94 million. That didn't bode well for the fourth-quarter results, in which comps were down 16% and the retailer missed analyst expectations on sales by almost $30 million. So what's an investor to do? Bid up the stock, of course!
Since hitting their nadir last month, Chico's shares have bounded some 46% higher. They've given back a little bit, but not much. Over on CAPS, investor sentiment seems to suggest that the women's retailer was simply beaten down too hard, much like the clearance markdowns Chico's initiated in December. Its fall has been hard enough and fast enough to make investors think the sell-off has been an overreaction.
CAPS investor upandcomersr finds Chico's to be an otherwise excellent retailer that has become a prime candidate for a turnaround play. That seems to coincide with the thinking of MJKpayday, who finds the retailer's financials still sound, making it one company in the industry that can outlast a drawn-out recession.
With more than 750 investors weighing in on Chicos, more than 90% believe it will outperform the market, though a slightly lower percentage of All-Star investors hold that same opinion. For those who think there's still plenty of downside potential in the stock, many CAPS investors would probably concur with sburbnman, who sees the economy getting mired in a vortex of negativity:
1. Budget Deficits are growing and will grow even larger as we ... pour more good money after bad ... and the wars will continue overseas...
2. Trade Deficits will grow ...
3. Social Security and Medicare problems have not been resolved, and ... pharmaceutical companies continue to ... drain the country.
4. Real Estate values will continue to dwindle, foreclosures will climb to record highs, unemployment will grow rampant ...
5. Families will not be able to afford higher education and those coming out of college will have a high student loan balances ...
These ... will put pressure on companies like Chico's and other high priced apparel companies.
While things usually do not get as bad as the worst-case scenario might suggest, that doesn't necessarily mean that Chico's and other specialty retailers will be flying high any time soon.
Shine your starlight
So, is Chico's still a cheeky find? Well, we haven't yet heard from you, and at Motley Fool CAPS, every investor's opinion counts. Your voice could determine whether these stocks become shooting stars or supernovas. Since it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?
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