These Cold Stocks Are 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 companies previously rated with one or two stars 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
Maybe you're not excited just yet about the PicoProjector from Microvision because you're thinking it will be useful only for PowerPoint presentations. And we all know that when the meeting lights go down we set our snooze alarms to wake us when the show's over. However, Microvision has a video up on YouTube that shows the possibilities for its technology when it's applied to gaming.

Strapped to a gun in a first-person shooter, no longer is the gamer tied to the couch in front of a fixed screen. Now he's actively participating as the action is projected onto a wall or some other flat surface and he's moving, turning, weaving. If we thought the Wii made gamers more of a participant, the PicoProjector has the potential to make gaming truly immersive.

Although takeover speculation is still rampant, with Texas Instruments (NYSE: TXN) a prime candidate since it supplies optical chips for many small projectors, that's little more than hoping and wishing. Instead, I see partnerships. Look for Electronic Arts or Activision Blizzard (Nasdaq: ATVI) to invest in Microvision's technology to develop content that takes full advantage of its capabilities.

CAPS member mjbsara also looks beyond the usual and sees the music industry as driving the technology forward:

A lot of new technology (e.g. a refrigerator that ties into the internet) I just don't get. This I get and I can really see it's potential. The big driver will be music. Kids will become accustomed to not only listening to their music on their MPG but also watching the videos -- thanks to Microvision.

Remember this
After Integrated Silicon Solution reported first-quarter earnings earlier this year, CAPS member EPS100Momentum wrote a little later in March that those results presaged even better results:

My kind of eps momentum 100% higher guidance for current qtr by ISSI with both higher sales and higher margin, Thats the best of both worlds for Earnings Upward Momentum. Plus $85 Million cash with no debt. Book value $5.21

Turns out this member was right, as the chip maker went from a $3.8 million loss in the year-ago fiscal second quarter to a $7.2 million profit this time around. The $0.27 per share in earnings ISS realized was driven by improving DRAM pricing as demand for its designs was the best it's been in years. Indeed, many semi companies are reporting booming business, with Applied Materials (Nasdaq: AMAT) expecting 120% growth in its silicon unit as computer makers build up DRAM supplies.

Integrated Silicon Solution anticipates the gains to continue with earnings of as much as $0.50 per share in the third quarter, well ahead of the $0.44 analysts are forecasting.

Driving home an opportunity
There weren't many surprises in the quarterly earnings of biological test maker Luminex, which reported profits in line with expectations. But revenue rose 30% and deals like the one it inked with Northrop Grumman (NYSE: NOC) to create next-generation autonomous biodetectors that warn of possible airborne biohazards add to its diverse product line.

More than 86% of the CAPS members rating the test maker apparently feel that diversity will serve it well in outperforming the broad averages. You can test your own skill on the Luminex CAPS page and let us know whether you think it can array its designs against the market.

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.