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's made that upward swing.

An astrolabe for investors
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 110,000-plus investors, offer a great way to monitor investor sentiment. Like astronomers scanning the skies, investors can follow a stock through its CAPS rating trend, by 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.

Company

CAPS Rating (5 Max)

Recent Price

Current-Year Estimated EPS Growth

Babcock & Brown Air (NYSE: FLY  )

***

$10.95

563%

Cedar Fair (NYSE: FUN  )

***

$18.34

32%

FedEx (NYSE: FDX  )

***

$77.81

(15%)

Huntsman (NYSE: HUN  )

***

$13.00

(50%)

MF Global (NYSE: MF  )

***

$5.79

(36%)

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. 

Deriving value
Derivatives are sophisticated, complex investments best left to the professionals. Investors have been concluding that derivatives broker MF Global has a value much less than previously thought. Over the past month, shares of the Motley Fool Global Gains recommendation had fallen as much as 75% based on a pair of miscues of its own along with the general malaise of the financial markets. Add in actions of a rogue trader earlier this year, and you have a stock that's off 90% from its 52-week high.

It staged a bit of rally last week along with competitor optionsXpress Holdings (Nasdaq: OXPS  ) -- MF Global's shares rose 27% on Friday alone as the options and futures brokerage reported concluding some transactions to bring its bridge loan from private-equity firm JC Flowers to a more manageable level.

With its short-term financing issues behind it for the moment, ratings agency Standard & Poor's took MF Global off its negative credit watch upon finding that the company's picture has stabilized. That's good news for investors such as CAPS member Cicciano, who find that this brokerage firm has been taken down by many external forces and is now undervalued: "MF has had its trouble no doubt, with a rogue trader and the general financial sector troubles, but at this point the stock is oversold."

Absolutely, positively going nowhere
Benjamin Franklin once described New Jersey as a keg tapped at two ends, in reference to the dominance of New York and Philadelphia over the Garden State. That might be a good metaphor for FedEx, which finds soaring fuel costs tapping its business at both its ground and air delivery service ends.

When your business is based on travel via trucks and planes, it's not surprising that you're going to have extreme sensitivity to fuel costs. Delivering mail and packages couldn't be any more dependent on those cost inputs. But it's not easy for FedEx, which posted a $0.78-per-share loss in the most recent quarter -- nor for UPS (NYSE: UPS  ) , which reported lower earnings compared with last year -- to raise rates.

Although the gas side of the equation is going to hurt, perhaps that's already factored into the stock price, now that FedEx trades at less than 13 times forward earnings, compared with more than 14 at UPS. CAPS member and All-Star TDL5150 simply believes that since the need to ship packages isn't going to end, the blue and orange shipper will remain a viable investment: "Tough years ahead for FedEx with the growing gas prices. That being said -- everyone still needs to ship packages and I have no doubt FedEx will come out on top."

Shine your starlight
So are these stocks threadbare or fashion-forward? At Motley Fool CAPS, every investor's opinion counts, and 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?

MF Global is a Global Gains selection. Both UPS and Cedar Fair are Income Investor picks, and FedEx and optionsXpress are Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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