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 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

Next Year EPS Growth

Amerigroup (NYSE:AGP)

***

$24.99

9%

Bed Bath & Beyond (NASDAQ:BBBY)

***

$27.38

14%

Medarex (NASDAQ:MEDX)

***

$9.22

(400%)

Office Depot (NYSE:ODP)

***

$6.50

30%

Pinnacle Airlines (NASDAQ:PNCL)

***

$5.80

54%

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.

Doctoring results
When it comes to biotechs and pharmaceutical companies, focusing on their pipelines becomes an obsession for many investors, sometimes to the detriment of making investment decisions. Sometimes the pipeline isn't everything. Yet for Medarex, its pipeline is the key to understanding the investment. It has dozens of drugs in development, which gives it a deep bench from which to choose, but can also hurt it when any one of them has less-than-stellar results. The company took a hit earlier this year when its lead drug, ipilimumab -- being developed with Bristol-Myers Squibb (NYSE:BMY) -- was delayed, and it took another hit last month when analysts expressed concern over the lack of data to back up the company's claims about the drug.

Yet it was able last week to announce a milestone payment it received because one of its therapies made it to clinical trials. Shares, which had fallen by 35% since the beginning of the year, have since risen by more than a like amount.

Medarex's bustling pipeline can make it hard for investors to analyze the company, according to top CAPS member PDTBiotech, who found Medarex to be a high-risk investment earlier this year, but one worth taking:

With such a dizzying array of antibodies in development, the market is likely to focus on whatever [Medarex] has in Phase III at any given time. In my opinion this company is one of the least efficiently digested by the market, which tends to overreact to a lot of news about the company because with such a large number of projects that have unknown terms there is no realistic way to model [Medarex] and come up with a starting value which could then be adjusted based on changes in estimates.

Housing an opportunity
When your business is tied to dressing up an industry that has been laid low by the economy, it's natural that the market is going to take a dim view of your prospects. Bed Bath & Beyond has seen its fortunes follow the wasting away of the housing market as margins tighten, but that has not deterred it from expanding its base of stores and taking market share from rivals like Pier 1 Imports (NYSE:PIR). CAPS member BobSizoo points out how a dominating market presence is good for investors:

Dumb reason No. 1-I bought in two years ago and liked it then. Wish I could buy more now.
Reason No. 2 P/E around 14 and ROE over 20%
Reason No. 3 I can't afford to sell my house and buy another. Guess I'll just spruce up my old house. Let's see, where am I going to shop? I don't think I'm alone ...

Shine your starlight
So are these stocks driving ahead or ready to crash? We haven't yet heard from you, and at Motley Fool CAPS, every investor's opinion counts. Since it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?

Bed Bath & Beyond is a Motley Fool Inside Value and a Motley Fool Stock Advisor pick. Amerigroup is a Stock Advisor selection. The Fool owns shares of Bed Bath & Beyond. Try either of these Foolish newsletter services free for 30 days, for advice on how to profit in the market.

Fool contributor Rich Duprey owns shares of Bed Bath & Beyond, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.