5 Cold Stocks Heating Up

When a stock's share price is 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, its 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 145,000-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. 

Caution: Contents may be hot
With nearly 9,000 people dead from swine flu since the first outbreak earlier this year, you can't say it hasn't been a serious health concern. Yet influenza of all stripes kills some half a million people worldwide every year, so the fear mongering of a plague-like pandemic needlessly alarmed millions, and like the boy who cried wolf, may cause the next real alert to be ignored.

Had swine flu turned into a real pandemic, though, we would have been ready as the DNA technology of Vical allowed it to rapidly test, develop, and produce large quantities of a vaccine. The company believes its technology will be key in creating a "paradigm shift" in how they're developed, and it is implementing it in other areas of treatment, including one for an investigational plasmid DNA cancer vaccine that it is developing with Merck (NYSE:MRK). It could turn into another area for investors to capitalize on.

CAPS member colbob2 identifies himself as a pharmacist who sees the future of vaccine development in Vical's technology:

As a pharmacist I feel the future in drugs is in the vaccine field, which VICL excels. With money from Merck, and (sanofi-aventis). I feel that this stock will move up next year and feel that the sell off that is now going on is a tax relief sell off.

Credit check
The jobs report issued last week was a bit of a hurrah for the Obama administration that we may have really left the recession behind. Although unemployment remains at 10%, it indicates we're moving in the right direction.

Or not. There are some serious critiques of the labor statistics showing that the numbers are vastly skewed and not representative of what is really underway in the economy. If that's the case, though, then we can expect to see individual credit profiles decline, giving headaches to credit card companies like American Express (NYSE:AXP), but also seriously undermining the capital position of financial services firms like Synovus Financial.

This past September, the bank holding company undertook a large $600 million stock offering to shore up its finances when the company was rocked by the collapse of the mortgage industry, and it has since had to allay investor fears that its credit losses would deteriorate further. With a Tier 1 common equity ratio of 6.4%, Synovus maintains it is well capitalized and well above the 4% minimum threshold.

If the jobs picture as presented holds up, CAPS member elmerraz sees Synovus coming out of this in better shape, a sentiment echoed by JamesMBaker, who sees management tackling the basics:

Wild card here. Medium regional bank in the Southeast with exposure to Commercial and Residential RE. They're through most of the RRE, now they are working on the CRE. Their focus is on liquidation of bad assests, get the Balance Sheet strengthend, build reserves and position for growth IF they can slog through 2010-2011 CRE mess. Management is focused and not doing anything fancy.

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 on which stocks you think are hot little numbers, and which offer cold comfort. It's free to sign up.