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 86,000-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 one- or two-star-rated companies that have recently enjoyed a bump in investor confidence and see whether the stars are really aligning in their favor.
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Company
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CAPS Rating
(5 max)
|
Recent Price
|
1-Year Return
|
|
Baidu.com (Nasdaq: BIDU )
|
***
|
$268.09
|
171%
|
|
Origin Agritech (Nasdaq: SEED )
|
***
|
$5.85
|
(23.7%)
|
|
JDS Uniphase (Nasdaq: JDSU )
|
***
|
$12.85
|
(14.7%)
|
|
Boyd Gaming (NYSE: BYD )
|
***
|
$19.50
|
(55.7%)
|
|
Internap Network Services (Nasdaq: INAP )
|
***
|
$6.28
|
(62.1%)
|
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.
Seed starter
Agriculture has been a growth industry, with company profits that have caused share prices to soar over the past year. Shares of Monsanto (NYSE: MON ) , Mosaic (NYSE: MOS ) , and Potash Corp. of Saskatchewan have doubled and tripled in value. On the other hand, shares of Origin Agritech, a Chinese crop seed supplier, have instead wallowed, falling more than 20% on the year.
Origin Agritech said its problem was an oversupply of crop seed in China, resulting in lower prices and regulators changing the way local seed authorities operated, so they liquidated their seed holdings, further depressing prices. There is only one analyst who covers Origin Agritech, and when the company posted results two weeks ago that fell horribly short of what was anticipated, shares reversed course and tumbled sharply.
The company offered guidance that, while cautious, probably didn't do much to alleviate the concerns investors might have about its results for the rest of the year. It's expected that inventories will remain high. However, Origin Agritech also finds the industry ripe for consolidation, which should alleviate the pressure on selling prices. With China becoming a net corn importer, the genetically modified seed crops like those Origin Agritech produces ought to help it boost growth.
CAPS player SmallCapKing says an investment in Origin Agritech is a bet on economists who remain bullish on the worldwide seed and fertilizer industries: "Seeds and fertilizer, global economists are calling for an increased bull market in these areas, even if global growth slows."
Others, quan331 for one, find that Forbes magazine's decision to name the company one of "Asia's 200 Best Under a Billion" means it has more potential than its critics, who fear a scam, give it credit for.
CAPS All-Star DavisFreeberg, who has a 96.92 player rating, accuses Origin Agritech of being "nothing but hype," and another All-Star, forbes10, says the management is "seedy." No one has accused the company of wrongdoing, but some investors might be suspicious because it used a so-called "blank check company" -- a business that has no specific business plan -- to bring about a reverse merger and go public. Then there is the case of Bodisen Biotech, a similar Chinese agricultural company that has been accused of misleading investors.
That, of course, says nothing about Origin Agritech. Although, as is the case with every investment, buyer beware.
Shine your starlight
So is Origin Agritech on its way to profitable growth, or will it separate you from your cash? 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. It's free to sign up and post your thoughts, so why not use this opportunity to take your star turn?
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