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's stars through its CAPS rating trend, tracking investor sentiment to help determine the best time to invest. Let's look at companies with one or two stars that have recently enjoyed a bump in investor confidence, and see whether the stars are really aligning in their favor.

Source: Motley Fool CAPS, Yahoo! Finance. EPS = earnings per share.

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.

Fat profit potential
Sounding like an affliction out of medieval times, gout has indeed attacked such historical notables as King Henry VIII and emperors Charles IV and V, as well as more contemporary figures like Napoleon III, Benjamin Franklin, and even Boston Red Sox pitcher Curt Schilling. Limitations on conventional therapies for this "disease of kings" -- a painful inflammation, often of the big toe -- has Savient Pharmaceuticals thinking the "orphan drug" pegloticase (a.k.a. Puricase) could be the leg up it needs.

That potential has investors like CAPS player techsavyone seeing Savient as ultimately being bought out to bolster a big pharma company's pipeline:

SVNT expects to receive approval from the FDA for Puricase, a Gout treatment, later this year. They passed Phase 3 trials meeting all their endpoints. All indications point to a major pharma company acquiring SVNT later this year or early next year to add Puricase to their pipeline. The treatment has huge potential.

Try this one for size
While it's interesting that a top women's fashion retailer has the name of the Spanish word for "boy," Chico's FAS has been facing more interesting times lately as it struggles to cope with the retail recession and shareholder anger. While its CEO and a board member fended off the ire of a hedge fund that wanted them booted, the company may still get a dressing-down next year with a full-bore proxy fight. Undoubtedly, that was behind the proposals that Chico's laid out recently to get its results all dolled up, but that hardly seems enough to ameliorate the wrath of some big stockholders.

Investors agree that much of what's been passing for fashion at Chico's seems to be a little threadbare, but CAPS players like jesterjustice see the trendy White House/Black Market brand as someplace where management could look for ideas:

Can this go any lower? Chico's proper has pretty lousy merchandise for a demographic that has stopped buying clothing recently, but their subsidiary White House Black Market has great clothes for young, hip people who don't believe that the credit crisis affects them.

Shine your starlight
Are these stocks threadbare or fashion forward? We haven't yet heard from you, and at Motley Fool CAPS, every investor's opinion counts. Membership is free.