These Cold Stocks Are Heating Up

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 and accuracy of 165,000-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.

Source: Motley Fool CAPS; NA = not available.

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
It's not dominating the headlines anymore, but BP's damaged well in the Gulf of Mexico is still not completely closed off. With a new blowout preventer to be installed, the oil giant is readying for the final steps that will kill the well. But out of sight, out of mind, which may help explain BP's recovery. Despite suspending its dividend and passing up on drilling opportunities, BP's shares -- which had at one time been cut in half -- are up more than 30% from their low point in June.

Like oil, gold is a commodity with ardent detractors and supporters. Don't tell a gold bug his faith in the tangible commodity is misplaced. Some view gold investing as little more than a Ponzi scheme; while others like Rep. Ron Paul view it as what will right our failing country.

But there's a world of difference between investing in the precious metal and buying shares of those that mine it, like Goldcorp or Barrick Gold (NYSE: ABX). Last month, both Goldcorp and Agnico-Eagle Mines (NYSE: AEM) reported outsized earnings as the price of the precious metal soared 30% over the year-ago period and production was ramped up. With demand for gold in China surging 26% in the second quarter, according to the World Gold Council, adherents for investing in both the miners and the metal would seem to have good reason to be bullish.

You can bank on it
It seems harder to build a bullish case for Japanese automaker Toyota. The one-time industry leader has suffered not only from the recession, like Ford (NYSE: F) and GM, but from a series of highly publicized safety issues that led to 8 million cars being recalled last year. Just last week the company recalled another 1.1 million vehicles because of stalling problems. While initial government findings indicate many of the problems thought to be with the cars were actually operator error, the black mark on Toyota's name means it will take a long time to associate the cars with quality again.

Estimates suggest Toyota is going to see its share of the U.S. auto market sink to 15.6% from 17.9% last year, according to the market analysts at TrueCar. It's the largest dip of any major automaker.

Sales are also taking a hit as the economy slides back toward recession, with Toyota forecast to see a 29% plunge when August sales are reported. Japanese car companies in general are also expected to take a big hit. Analysts are anticipating Honda Motor (NYSE: HMC) will see a 27% drop with Nissan following at 24%.

By comparison, Ford's 5% drop is a testament to the continuing popularity of its cars. While Chrysler will actually see a sales increase, it is being helped along by big fleet orders and the fact that it has the most generous incentives in the industry. General Motors, which recently filed its paperwork for its IPO, will see sales plummet 19% in the month, analysts say.

CAPS member GettinTheFlow thinks that Toyota's history of quality will work its way to the top again. But Tyler7000 thinks it's time for the carmaker to take a page from Ford's playbook:

Toyota designs cars like it's 1998. I'm not even talking about the car breaks. Their exterior designs will force this once great company to decline in the next year. At some point they need to completely redesign all their lines a la Ford or their profits will pay the price.

Checking the mercury
Are these stocks invitingly warm or bitterly frosty? It pays to start your research on these stocks 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.