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 105,000-plus investors, 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. 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.


CAPS Rating (Out of 5)

Recent Price

Current Fiscal Year EPS Growth Estimate

Alesco Financial (NYSE:AFN)












Gencor Industries (NASDAQ:GENC)




Immunomedics (Nasdaq: IMMU




Source: Motley Fool CAPS and Yahoo! Finance. NA = Not available.

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. 

Seizing the day
A bevy of risky debt instruments, such as collateralized debt obligations (CDOs) and mortgage-backed securities, have taken their toll on real estate investment trust Alesco Financial. It's been hammered recently as a result of the trouble in the credit markets and because of Indymac Bank's (NYSE:IMB) decision last month to defer making interest payments on a number of securities it owns.

After reviewing the situation, though, Alesco said it expects the CDOs to eventually heal and that its dividend is safe for now, since it has sufficient cash resources for the rest of the year. However, it's also formed a special committee to look at a number of strategic alternatives, including whether it should retain its status as a REIT.

So far, investors are still banking on Alesco to pull through. Although its shares dropped at first on the Indymac news, they recovered the next day. Over on CAPS, one-third of the investors rating the stock think it will underperform, but the majority think it has the wherewithal to withstand a complete implosion.

CAPS All-Star pytheian realizes there are still a lot of "ifs" facing the company but that it might have taken enough steps to survive.  Here's an excerpt from the pitch this player made a month ago:

Only two questions.
1. Can they keep it up (obviously assumes no bankruptcy)?
2. Can they maintain their REIT status (otherwise potential for double taxation)?

Mgmt represents that they've:
1. Taken all their medicine (written down assets to market value)
2. Freed up cash
3. Gotten rid of recourse liabilities (which drive margin calls)

If true, this is a moonshot.

Of course, not all are convinced. If Bear Stearns could fail, deuspecuniae speculates, then what's to keep lesser names from following it down, even if there are some that seem to be rising now?

The credit crises and [mortgage] meltdown in the U.S. isn't going anywhere this summer and is likely to only get worse. If Bear Sterns couldn't survive what hope is [there] for the rest of the financial sector[?] Yes, the financial sector seems to be jumping back and key reversals seem to be lifting bullish investors, but this ray of hope will end once investors understand how bad this looming recession is going to be.

Shine your starlight
So is Alesco going to remain in financial distress? Or is its upgrade from one stars to two the start of something positive? Well, at Motley Fool CAPS, every investor's opinion counts. 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?