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 165,000-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
Particularly after acquiring Anheuser-Busch, Belgium's InBev is a brewing powerhouse that shouldn't be taken lightly. As Boston Beer (NYSE: SAM) founder Jim Koch has pointed out, the maker of Budweiser spills more beer than Koch makes in a year. With such a wide distribution network and the ability to enter a market and dominate it, smaller brewers could be squeezed.

Look at the planned IPO of Chinese beer maker Guangzhou Zhujiang Brewery, in which InBev owns nearly a quarter of the company. It will immediately get the muscle of the big brewer behind it as it expands its presence in China by building two 200,000-ton beer production facilities in Hunan and Guangxi provinces. SABMiller and Heineken have also established bases in China, but look for Zhujiang to try and seize more share there where it's currently the fifth largest brewer.

It's a similar modus operandi to the dominance Anheuser has shown in Latin America. Its Brazilian subsidiary AmBev is the biggest bottler of PepsiCo outside the U.S.

CAPS All-Star TMFDeej says Anheuser-Busch remains a "cash cow" that will only get better as its balance sheet improves.

Anheuser-Busch InBev should have no trouble paying down its massive slug of debt. And the more it pays off, the better its earnings will become. Plus the combination of these two companies will likely result in greater cost synergies than was originally expected. InBev's management has a history of effectively squeezing cost out of acquisitions. At some point, perhaps in late 2011 the company will likely begin to return money to shareholders via a larger dividend and buybacks.

A real stem-winder
After President Obama's election, investors in stem cell researchers Geron, StemCells (Nasdaq: STEM), and other emerging science niches were riding high on the potential for new advances to be made as federal funding would no longer be withheld in certain areas. Although there still seems to be a lot of hype in the sector, Geron is advancing a number of potential therapies.

For example, GRNOPC1 is initially being studied for spinal cord injuries, but it also plans to look at other neurological diseases as well, including multiple sclerosis, stroke, and Alzheimer's. Another treatment, GRNCM1, reportedly did not cause any abnormal electrical activity after it was transplanted during preclinical studies, suggesting it could be useful in treating chronic heart injuries.

CAPS All-Star and biotech guru zzlangerhans isn't about to get too worked up about Geron just yet, but feels the financial turmoil in Europe has created an interesting entry point.

Geron is not a company to get excited about due to their long, long history of cyclical stock movements and early stage stem cell trials that never go anywhere. But the European debt crisis has sent the share price to a one year low despite the plans to initiate two new trials in the next few months. The share price now seems relatively low considering the stock's historic performance and current short-term outlook.

Not so threadbare
Regardless of what day it is, discount retailer Tuesday Morning is attracting more attention as sales rose last quarter despite slightly lower average ticket sizes. The homegoods closeout outlet has been restructuring itself, closing underperforming stores and relocating others to areas better suited to take advantage of conditions. Yet things might get dicey now that the taxpayer gift to first-time homebuyers has come to an end.

Bed Bath & Beyond (Nasdaq: BBBY) is another beneficiary of the stronger home sales we've witnessed, but they're being cautious as visibility remains uncertain particularly in the back half of the year when they'll be going up against tougher comparables.

CAPS member udflyerz likes that Tuesday Morning has remained debt-free, meaning it will be able to navigate these difficult times with greater agility.

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.