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 160,000-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
Peter Lynch once noted that company insiders can sell their shares for any number of reasons, but typically only buy them for one: They think the stock is going to go up. CAPS member lewloG recently pointed out that since the beginning of the year, a number of executives and directors of Huntington Bancshares have been making direct market purchases of company stock:

Huge insider buying by chairman, upper management, through dealing with debt problems, strong capital position, extremely depressed recovery stock, we NEED banks

Regional banks have had a heady run-up in recent months, partially as a result of sentiment suggesting the so-called Volcker Rule has been laid to rest. Huntington's shares are some 47% higher than they were three months ago, while Regions Financial's (NYSE: RF) trade 38% higher. Is this change we can bank on? Let us know on the Huntington Bancshares CAPS page today.

Don't get disconnected
Investors weren't stupid for cashing in on Qwest Communications' low price. Six months ago, the telecom leader saw its stock languishing just above $3 a share, but today it's soaring 50% higher, outpacing larger rivals like Verizon (NYSE: VZ) and AT&T (NYSE: T) despite a 40% drop in per-share profits that even missed analysts' low expectations.

CAPS member BigDiv realizes Qwest faces tough competition, but figures the telecom provider is worthy of a long-term place in an investor's portfolio:

Qwest is a small fish in the broadband ocean. But it is affordable and the company tries to share its wealth by paying out a dividend. Buy and hold...

Building a support structure
We all know fashion can be fickle, and American Apparel looked like a company that, if it didn't succumb to the vagaries of whim, would self-destruct because of its mercurial CEO. Yet investors picked up on the fact that it was positioning itself for a strong showing and saw it twisting the trend of using social media to promote its threads.

The retailer, which has long used nonprofessional models to advertise its clothes, got thousands of its customers to upload pictures of themselves wearing American Apparel clothes to a social fashion rating site, Lookbook.nu. It then reshot some of the best and began using them in its ads.

Crowdsourcing has been called dead even before it had a real life, but if American Apparel can use services like Lookbook to offer cutting-edge statements, then Twitter, Facebook, or apps that Google or Microsoft (Nasdaq: MSFT) might want to get in on can breathe new life into the medium. In the interim, investors like CAPS member camor say the clothing retailer has proven that it was more than just a flash in the pan:

The company has proven so far that its success was not based in a fad. It produces basics in a cutting edge fashion that will only become more popular.

You can give the clothier a look on the American Apparel CAPS page and write a book about whether the retailer will continue to move fashion forward.

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.