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; NA = not available.

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
This year has shown just how costly our addiction to fossil fuels can be. Massey Energy suffered a coalmine explosion that killed dozens of miners. BP (NYSE: BP) saw one of its oil rigs collapse, in an explosion that killed 11 workers and unleashed a horrendous environmental disaster. And within days of each other, Chief Oil & Gas and EOG Resources (NYSE: EOG) saw natural gas wells suffer blowouts that injured workers. A third gas explosion occurred in rural Texas when a subcontractor drilled into a natural gas pipeline, killing a utility worker and igniting a tremendous fireball visible for miles.

The immediate response to these tragedies is to shut down all drilling until an assessment can be made. President Obama imposed a moratorium on any drilling in the Gulf of Mexico, while EOG Resources complied with a Pennsylvania order to halt natural gas drilling in the state. But while temporary bans may be helpful to assess the risks, it's not feasible to keep them indefinitely. President Obama realized that at least shallow-water drilling had to be permitted to keep the overall economy, which depends partly on those jobs, on track for recovery.

Massey didn't have to cease operations after the explosion, but it is facing criminal investigations into whether it was lax with its safety procedures. CAPS All-Star HashPipe99 thinks the scrutiny Massey will face as a result of the disaster -- and undoubtedly in the wake of the series of tragedies -- will cause the coalminer to lag:

Every mine inspector from the entire U.S., both public and private (if there is such a thing), retired, still in training, etc., are going to crawl up these guys [expletive] for the next year or two and come down extra heavy on any and every violation that they find; no matter how small. And you're kidding yourself if these violations are not going to result in numerous mine shut-downs (i.e., lost production). 

A real stem-winder
When I consider the kneecapping Ford suffered at the hands of the government, my admiration for this automaker leaps considerably higher. Not only were U.S. taxpayers forced to bail out GM and Chrysler (which was then sold to Italian car company Fiat), but Ford was left at a competitive disadvantage to the government=aided car companies since its legacy costs and debt burden weren't transferred to taxpayers.

With Toyota (NYSE: TM) reeling from self-inflicted wounds, Ford should be able to take advantage of a less competitive landscape. CAPS member nibs61 thinks Ford's management team makes it an even more remarkable company:

What this company has done while the [economy] was at its lowest is quite remarkable. They did not need to be bailed out and got through their tough times with good management decisions. Now that we are on our way back ( ever so slowly). This management team will position their company to reap the rewards. This is a management play for me.

Not so threadbare
Like Regions Financial (NYSE: RF) and other regional banks, Synovus Financial has suffered as a result of the housing market's collapse. But because of its geographic concentration in the southeast, particularly Florida, Synovus has perhaps felt the pain more acutely than some of its rivals. Regions is also heavily concentrated in Florida, but offers it more geographic diversity than does Synovus.

As a result, Synovus is now consolidating its 30 different subsidiaries into one single entity, with the hope that it reduces costs and risks while increasing efficiency. The CAPS community remains generally bullish on the bank's chances of beating the market, with 83% of those who've rated it marking it for outperformance. You can deposit your opinion on the Synovus Financial CAPS page.

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.