Unloved Stocks Ready to Shine

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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 115,000-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 and track 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 previously rated one- or two-star 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	Next Year's Estimated EPS Growth
Allos Therapeutics (Nasdaq: ALTH)	***	$8.32	(3.0%)
Annaly Capital Management (NYSE: NLY)	***	$17.00	14%
Popular (Nasdaq: BPOP)	***	$10.50	129%
Sonic Solutions (Nasdaq: SNIC)	***	$4.61	200%
Xerox (NYSE: XRX)	***	$12.57	13%

Sources: 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
Since slashing its dividend last month alongside MBT Financial (Nasdaq: MBTF), Popular, the operator of Puerto Rico-based Banco Popular, hasn't been exactly popular with investors … until the Federal Reserve announced that it may make a sweeping proposal to save the financial industry.

Yet CAPS member NotJesseL thinks the bank has been conservative with its subprime mortgages while it caters to a rising Hispanic population: "I am going to bet that Banco Popular was more conservative than average with the subprime and also they have good healthy demographics with the growing Hispanic population, plus a lot of non-[H]ispanic businesses are finding them great to deal with."

Meanwhile, many people may have forgotten that Xerox still exists, but its days of wandering in the wilderness seem to be over. Even with heady competition from Hewlett-Packard (NYSE: HPQ), the company is profitable. It's been spending hefty amounts on research and development, and it even restored its dividend a few years ago. CAPS member nGenius doesn't think there was any divine intervention to get Xerox back on top -- it just required the proliferation of quality enterprise copiers.

Many people may not know it but the … copier is the working horse of any size [business]. No matter how well [copiers are] built they can't last forever because of moving parts leading to wear and tear [and] thus regular [professional maintenance]. Eventually depending on how often they've been used it'll make economic sense to replace copier(s). Imagine a large corporation which has lots of copiers running 24 hours a day?

Shine your starlight
So are these stocks driving ahead or ready to crash? 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 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?