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
There was a time when supply agreements were a key performance measure for solar shops. Suntech Power (NYSE: STP) was hammering out supersized pledges with Shunda, Trina Solar (NYSE: TSL) struck gold with GCL Silicon, and LDK Solar (NYSE: LDK) was signing on Q-Cells and Canadian Solar for its wafers for a decade. The deals were so lucrative to LDK that they accounted for 21% and 8%, respectively, of its revenues last year.

But the sun isn't shining so brightly on solar these days. LDK found itself in a snit with Q-Cells last year over who broke what contract, and it's back in court again, this time suing Canadian Solar for allegedly breaching their take-or-pay agreement.

Canadian Solar has fallen on hard times, with revenues slipping 2% as earnings plummeted 82% from last year as currency exchange fluctuations and litigation charges related to an SEC investigation weighed on results. Yet 88% of the 1,179 CAPS members rating the solar specialist see it outperforming the broad market averages. No doubt they were encouraged that shipments in the latest quarter continued to rise while the company reiterated full-year shipments of 700 megawatts to 800 megawatts.

Now that Burger King is going private again, investors are looking to see which other burger joint private equity might want to sink its teeth into. Wendy's / Arby's Group is one that looks ready to have its fat taken out of the fryer. With shares priced at about the same level as a value meal, CAPS member traderbill13 says Wendy's is an excellent takeover target.

You can bank on it
Even if the federal cash grant program powering alternative energy projects is allowed to expire, Power-One should be able to benefit from other initiatives pushing utility-scale solar projects. Like Satcon Technology (Nasdaq: SATC), the country's largest inverter manufacturer, Power-One's inverters are targeted to the solar and wind power sectors.

Since we've seen a few of the big names in wind and solar miss analyst expectations -- A-Power Energy Generation Systems (Nasdaq: APWR) and Vestas each missed earnings projections -- it might seem there could be spots of trouble for Power-One. Yet analysts note the U.S. is ranked fourth in total solar capacity and is the fastest-growing market in the world. That's going to represent a lot of opportunity to sell inverters into, and CAPS member MADBOYMCCABE sees that as the heart of Power-One's investment thesis:

Power storage and conversion is the heart of … alternative energy. Turbines and solar panels are usless without the meens to convert them into a usable form. [Power-One] continues to prove it will be a giant in this field. It has a whole lot more to offer than that! Been tracking it since it was at $2.00. Holding it for life.

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.