5 Cold Stocks Heating Up

When a stock sports a share price lower than a North Dakota thermometer in February, investors tend to give it the cold shoulder. But as the market warms to a stock's prospects, that stock's price can heat up in a hurry. Alas, you can rarely tell that a stock is melting investors' hearts until after it's made that upward leap.

Taking the market's temperature
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 135,000-plus members, offer a great way to monitor investor sentiment. Following a CAPS rating trend can help us determine the best time to invest. Let's look at previously rated one- or two-star companies that have recently enjoyed a bump in investor confidence and see whether they're truly heating up -- or headed back to the deep freeze.

Source: Motley Fool CAPS.

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
The U.S. dollar remains one of the top drivers of gold prices, and with the weakness the greenback has exhibited in recent months, the yellow metal has been soaring. Part of the weakness has to do with the deluge of dollars into the economy. In fact, the flood of paper is one of the top 10 reasons investors should consider owning gold. The influx of money virtually assures that we will experience inflation -- even if things never get as bad as they are in Zimbabwe. Yes, despite the beliefs of some Nobel laureate economists, some other pretty smart minds seem to think inflation is on the way.

So an investment in gold now, even as it tests its record highs of $1,000 an ounce, can still be a smart investment. But does that translate into an investment in a miner like AngloGold Ashanti?

It was a potent combination of rising gold prices and a reduction in its hedge exposure that allowed Anglo, the largest African producer of gold and the third-largest in the world, to post strong first-quarter results.

Anglo's hedge book, the gold that it sells forward at predetermined rates, has been an obstacle to performance even though the metal has had a fairly strong demand environment. As a result, Anglo has been cutting its hedge book at a furious pace, reducing it by half over the past year to 5.84 million ounces. And the company wants to take it below 4 million ounces by the end of next year.

The indicators suggesting that gold will maintain its lofty value for a while should be good news for Anglo. But production levels in the first quarter fell by 13%, and second-quarter guidance is flat. No. 4 gold producer Gold Fields (NYSE:GFI) also reported better numbers for the quarter that ended in March, but it did so with higher output. It's also one of the largest unhedged producers of gold, and that makes Gold Fields an attractive candidate. Newmont Mining (NYSE:NEM) also bullishly rid itself of its hedged position last year.

After a disappointing year in which the 195 companies that make up CAPS' Metals and Mining tag lost 31% on average, they've rebounded more than 15% over the past 30 days. And investors remain intrigued by AngloGold Ashanti's potential. CAPS member UnCommonEquity writes of the gold producer: "One of the lowest cost producers of Gold in the industry is a good hedge in case you believe that all the quantitative easing will lead to significant inflation down the road."

Here comes the sun
Are these stocks getting toasty, or are they still a frostbite risk? It pays to start your research 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 heating up. Since it's free to sign up and post your thoughts, why not use this opportunity to turn up the heat in your own portfolio?