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 170,000-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.
EPS Estimates (This Year - Next Year)
||***||$46.54||$4.70 - $5.56|
||***||$59.62||$1.67 - $1.85|
||***||$15.21||($1.60) - ($0.86)|
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
With Facebook, Pandora, LinkedIn, and other social-media darlings perhaps preparing for their public-market debutante balls, JPMorgan Chase is creating an investment fund to trade in these companies. Right now, stock in these companies is only available in private markets, but the companies are already sporting sky-high valuations.
LinkedIn has a rumored value of around $2 billion; Zynga, the maker of FarmVille, is said to be priced around $7 billion; and Facebook soars above the crowd with a $56 billion price tag. (To put that in perspective: Patriot Coal has a market cap of $2.2 billion, Akamai Technologies goes for $7.5 billion, and eBay trades for close to $45 billion.) It's worthwhile to ask whether these are real numbers, or are we in a social-media bubble that will pop like all the other manias?
JPMorgan is, of course, looking out for the future. By buying in now, it will have a ready pool of retail investors when these high-profile names do go public. It might even work out to get some business from their IPOs. JPMorgan CEO Jamie Dimon is nothing if not shrewd, and CAPS member cmstripling says that even its purchase of the failed Washington Mutual was a strategy to game future growth:
Overall banking sector is still low due to the recent recession. And with JPM's 'purchase' of WAMU when it collapsed, and it's huge customer base, it should have a solid foundation for future growth.
Deposit your thoughts on the JPMorgan Chase CAPS page on whether the social-media craze is a paradigm shift or prelude to a fall.
A glowing opportunity
Speaking of shifts, it's also valid to wonder whether the iPad represents a whole new challenge to computing. Sound specialist Dolby Labs saw its stock come under pressure because of the fear of lost PC sales, disk drive makers Western Digital and Seagate Technology
However, as Intel's recent earnings report showed, the enterprise market remains a rich area for growth. Storage specialist NetApp commands almost a quarter of the small-to-medium business market and despite an earnings snafu last November, the stock has rebounded and continues to build on its gains.
CAPS member cmolinel says demand for storage continues unabated, regardless of the platform, and 88% of the CAPS members rating the storage specialist would agree that's why NetApp is likely to outperform the broad market averages. You can follow along with NetApp's progress by adding it to your watchlist.
Step into the stream
Transitioning from the clinical stage to a commercial organization is typically the goal biotech investors have for their firms, and with Seattle Genetics planning on hitting that pay dirt this year, the potential for realizing extreme growth is within sight. The biotech scored a big partnership with Pfizer
While revenues and losses for the fourth quarter were wider than a year ago, they were ahead of analyst expectations. But its outlook for the coming year was somewhat below forecasts, and shares of Seattle Genetics have given back recent gains.
CAPS member nizzer thinks a deep pipeline will support the company as it gears up for growth, underscoring management's contention that success in certain areas of its business is driving investment in other areas:
Strong pipeline probable upcoming approval which would provide profit from multiple sources makes this stock a very attractive buy.
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.
Pfizer and Intel are Motley Fool Inside Value picks. Akamai Technologies is a Motley Fool Rule Breakers recommendation. Dolby Laboratories and eBay are Motley Fool Stock Advisor picks. The Fool owns shares of JPMorgan Chase and Western Digital. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Fool contributor Rich Duprey owns shares of Dolby Labs but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.