5 Cold Stocks Heating Up

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

Taking the market's temperature
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 140,000-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 up to see whether they're truly heating up -- or headed back to the deep freeze.

Source: Motley Fool CAPS; NA=not available.

Obviously, this is not a list of stocks to buy -- just a starting point for further research. Yet if some investors are taking notice of these stocks, maybe we should, too. 

Caution: Contents may be hot
Keryx Biopharmaceuticals has been on a roll. It recently received word that the Food and Drug Administration had granted its multiple myeloma therapy orphan drug status and it will start late-stage trials on the treatment for tumors in bone marrow by the end of the year.

It also said that its hyperphosphatemia treatment Zerenex showed high tolerance and safety in a mid-stage study of long-term use in patients with chronic kidney failure. Hyperphosphatemia is dangerously high levels of phosphate in the blood. According to the U.S. Renal Data System, America has nearly 527,000 such patients, many of whom routinely require dialysis for their condition, such as that provided by DaVita (NYSE:DVA) in one of its many dialysis centers.

While shares of Keryx have rallied a lot over the past year, it still has a long way to go before it fully recovers from how it dropped last year when a late-stage trial of its diabetic nephropathy drug Sulonex failed.

Yet CAPS member rachisme73 says that until Sulonex, Keryx was an otherwise solid performer, and with two drugs in late-stage trials, it holds promise. Similarly, kingleader figures that if Keryx is able to report any good news on those trials, the stock will soar.

Red hot or ice cold?
Investment banker Rodman & Renshaw has chosen to play in the biotech sector at a particularly opportune time, underwriting some of the top biotech names, and Keryx's own recent $20 million offering. Yet its own shares took a hit when it filed for a mixed offering of $75 million that included its CEO and its chief investment banker selling up to 3 million of their own shares.

No doubt, the big gains the stock realized over the past six months led to the decision to sell, but those gains came because the bank completed 32 financing transactions, raising $634.7 million, in the third quarter, including ones by Spectrum Pharmaceuticals (NASDAQ:SPPI) and Cell Therapeutics. The numbers were well ahead of the 25 financing transactions Rodman & Renshaw closed in the second quarter.

CAPS member dwl2693 says Rodman & Renshaw will reap rewards.

The development of new technology and phramaceuticals in the biotech field will bring great rewards going forward if [you're] in early. Based on projections of new drugs to come to market and the need for better technology to assist this market will bring a win[d]fall for investors.

Checking the mercury
Are these stocks invitingly warm or bitterly frosty? 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. It's free to sign up.