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
Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 150,000-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 rated one- or two-star companies that have recently enjoyed a bump in investor confidence, and see whether they're truly heating up -- or headed back to the deep freeze.
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Company
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CAPS Rating (out of 5)
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Recent Price
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EPS Estimates (This Year-Next Year)
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Cymer (Nasdaq: CYMI )
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***
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$33.13
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$2.44-$3.30
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Delcath Systems (Nasdaq: DCTH )
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***
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$5.37
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($0.74)-($0.55)
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Genvec (Nasdaq: GNVC )
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***
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$2.40
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($0.17)-($0.18)
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NutriSystem (Nasdaq: NTRI )
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***
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$21.08
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$1.00-$1.55
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Santarus (Nasdaq: SNTS )
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***
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$3.99
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$0.33-$0.26
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Source: Motley Fool CAPS.
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
Cancer therapy developer GenVec deserved to be picked as a stock ready for a fall. Shares spiked last month, after the company reported signing a collaboration deal with Novartis. The deal made wasn't for its drug TNFerade, a pancreatic cancer treatment; instead, it involved a hearing-loss treatment. That announcement was followed by news that GenVec would dilute shares with a 14-million-share stock offering at $2 a stub, along with another 4 million warrants. GenVec's stock tumbled in the aftermath, though it's since regained some of the lost ground.
Investors continue to look forward to news about TNFerade, however, and CAPS member breaker8 says the biotech has plenty of near- and long-term catalysts to play with:
GNVC has a nice blend of short term and long term commercialization opportunities for their gene delivery platform/. Look for a big stock jump on TNFerade PIII interim results for pancreatic cancer in April. Revenues from FMD veterinary program in 2nd half of 2010 and long term partnership for hearing loss restoration with Novartis.
Roughly 93% of the more than 300 CAPS members who've rated the biotech believe it will outperform the market. That suggests they believe that GenVec's phase III study of TNFerade will ultimately prove positive. Join them on the GenVec CAPS page, and give us your views on the company's future.
Supplying the next wave
It's not easy to dismiss a patent challenge being brought by as big a concern as Par Pharmaceuticals. But if Santarus can dodge that bullet, it ought to be able to carve a niche for itself in the treatment of acid reflux. Its Zegerid is marketed in Europe with GlaxoSmithKline, with additional opportunities with Merck (NYSE: MRK ) opening up.
But the acid reflux market already houses a number of large players, most notably Nexium, one of AstraZeneca's top-selling drugs. Nexium loses its patent protection soon, and Teva Pharmaceuticals (Nasdaq: TEVA ) will be able to market a generic version as early as 2014. Against a cheap generic form of such a popular drug, Santarus will have its work cut out for it if it wants to make it big.
Although it flies under the radar of many investors, 88% of the CAPS members who've rated the pharmaceutical think Santarus can outperform the market. Don't get heartburn thinking about it -- head over to the Santarus CAPS page and share your opinions about what lies ahead.
Checking the mercury
Are these stocks invitingly warm, or bitterly frosty? 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 you think are hot little numbers, and which offer cold comfort. It's free to sign up.
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