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 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.

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
Over the past year, as the S&P 500 rose 12%, the CAPS freight services sector has performed slightly better, jumping 18% and underscoring the benefit it derives from an improving economy. And not just here at home, but globally, too.

Better results in Asia, for example, have caused both UPS (NYSE: UPS) and FedEx (NYSE: FDX) to add more flights to their routes. About 28% of FedEx's revenues are internationally derived while it's closer to 25% for UPS. Air Transport Services Group will have to content itself with an improving U.S. economy, as all of its revenues are homegrown.

The domestic carrier was first identified as a stock that would take wing last August; its shares are nearly 60% higher. As 87% of the CAPS members rating the air freight specialist mark it to outperform the broad market averages, it seems they agree it still has a tailwind pushing it forward.

You can let us know on the Air Transport Services CAPS page whether the stock has any altitude left.

Fractured future
Flotek investors don't seem the least bit concerned about the anti-fracking debate in Washington. Perhaps they're expecting the need to develop additional sources of domestic fossil fuels to outweigh the concerns of environmentalists who contend hydraulic fracturing processes contaminate groundwater.

The stock is 35% higher over the past month, but is up an astounding 470% over the past six. Yet the Interior Department is considering requiring companies to reveal more information about the chemicals they use to fracture underground rock to release the oil and gas trapped there. Halliburton, Baker Hughes, and Flotek are all primary suppliers of the chemicals used in hydraulic fracturing and could see business crumble if Congress ever gets around to limiting or even banning the procedure.

More than 96% of the 271 All-Star CAPS members rating the drilling services shop think it can beat the market. You can keep tabs on the anti-fracking debate by adding Flotek to your watchlist.

Getting the urge
The decision earlier this year by Ocz Technology Group to abandon the DRAM market in favor of making solid-state drives should give investors in STEC (Nasdaq: STEC) pause. While it signals there's more profit opportunity ahead, something they've been saying all along, it also means there will be more competition fighting for a slice of the pie. STEC's revenues fell 11% last quarter and profits dropped 31%. The last thing it needs is another competitor like Ocz marching in on its territory.

There ought to be room for everyone, though, and even higher profits. Western Digital's (NYSE: WDC) purchase of drive maker Hitachi should cause prices to rise, helping the remaining players in the space.

Ocz has shipped its 1 millionth solid-state drive, and CAPS member mgl888 expects that number only to grow. You can drive on over to the Ocz Technology Group CAPS page and do your fellow investors a solid by leaving your thoughts on its future in this highly competitive 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.