Unloved Stocks Ready to Shine

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 has made that upward swing.

An astrolabe for investors
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 120,000-plus members, 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. Data suggests that CAPS' highest-rated stocks performed best while the lowest-rated did worst, so let's look at companies that had been rated one or two stars but have recently enjoyed a bump in investor confidence to see whether the stars are really aligning in their favor.

Company

CAPS Rating (out of 5 max)

Recent Price

Next Year EPS Growth

CBS (NYSE: CBS  )

***

$6.55

(25%)

Isilon Systems (Nasdaq: ISLN  )

***

$3.37

29%

Southwest Airlines (NYSE: LUV  )

***

$8.43

41%

SunPower (Nasdaq: SPWRA  )

***

$34.01

35%

Westport Innovations (Nasdaq: WPRT  )

***

$4.15

88%

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.

The sun's always shining somewhere
Following its spinoff from Cypress Semiconductor (NYSE: CY  ) , solar company SunPower delivered a surprisingly sunny picture that surprised many but offered hope that the tax credits Congress passed would recharge the industry. Yet there are storm clouds ahead, too, which has some becoming skeptical about the industry.

One CAPS member, alanbuder, thinks the future's plenty bright, making SunPower a good buy now for the next few years.

Now that the market downturn is eliminating quite a bit of speculation from market pricing and the Obama administration [is] starting to talk about investing in the green economy as part of the strategy to restart the economy (think CCC & WPA and the great depression) … US based companies like [First Solar], SPWR and [Evergreen Solar] look very attractive for the two to four year time frame.

The price of oil has dropped precipitously, so airlines might breathe easier as they step away from the abyss. As one of the top low-cost carriers, Southwest Airlines might be best-positioned to take advantage of the lower price inputs even if demand remains weak. One of the top-rated CAPS members, deepakshenoy, offers some bullish thoughts.

Crude's down, low cost carrier, overhead'll come down dramatically. May also get cheap planes after the bust. I wouldn't say buy-in absolute terms this stock won't go places in a year, but it will outperform the S&P.

Investors in Westport Innovations hope that the lower price of oil doesn't deter investment in alternative fuel solutions. The company's natural-gas-powered truck engines have attracted the attention of T. Boone Pickens, who is boosting liquefied natural gas with his own company Clean Energy Fuels (Nasdaq: CLNE  ) . CAPS member zoagra thinks a partnership with Cummins will be fruitful.

After raising additional capital and listing in the U.S. last summer, Westport is positioned to continue to execute on its business strategy in partnership with Cummins. This speculative stock has recently been driven down in price as investors flee risk assets. It should bounce back to $10 levels when the panic subsides and investors begin to contemplate likely U.S. energy policy after the 2008 elections. Global partnership with Cummins offers long-term growth under most economic scenarios. A high quality speculation that should be accumulated on pullbacks.

Shine your starlight
So are these stocks driving ahead or ready to crash? It pays to start your research 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 are shooting stars or supernovas. Because it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?

Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (15)

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  • Report this Comment On November 29, 2008, at 3:46 PM, bens718 wrote:

    Isilon and 3Ality will be broadcasting NFL Thursday

    night football in select 3D Theatres Dec. 4th.

    Isilon clustered storage for unstructured data

    is a leader in the next media = 3D TV

    Check out other uses in life sciences, oil & gas,

    Space, etc. WWW.ISILON.COM

    40% GROWTH, NEW SALES LEADERS COMING

    ON BOARD FROM NET APP AND EMC.

  • Report this Comment On December 07, 2008, at 9:36 PM, billadams444 wrote:

    Rich Duprey article above leaves me wondering about his basic research. How can he talk about T. Boone Pickens support for LNG while Pickens has sold off more than $60 mill worth of shares in CLNE in recent months? Something going on that you experts aren't catching or reporting.

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