Think of investor sentiment as a pendulum that swings in tandem with a company's share price. When investors begin to think highly of your company, its stock might also start heading in the right direction. Alas, you can rarely tell when investors are warming to a stock until after it's made that upward swing.
An astrolabe for investors
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 100,000-plus investors, offer a great way to monitor investor sentiment. Like astronomers scanning the skies, investors can follow a stock's stars through its CAPS rating trend and track investor sentiment to help determine the best time to invest. Let's look at one- or two-star-rated companies that have recently enjoyed a bump in investor confidence and see whether the stars are really aligning in their favor.
|
Company |
CAPS Rating (5 Max) |
Recent Price |
Estimated 2008 EPS Growth |
|---|---|---|---|
|
Capstone Turbine |
*** |
$3.38 |
25%* |
|
Trina Solar |
*** |
$47.76 |
115% |
|
Goodyear Tire & Rubber |
*** |
$29.22 |
80% |
|
James River Coal |
*** |
$34.26 |
74% |
|
Rangold Resources |
*** |
$44.78 |
120% |
Source: Yahoo! Finance and CAPS.
*FY 09, ending 3/31/09.
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.
Still rolling on
It wasn't that long ago that I was excoriating Goodyear for its accounting flubs. Yet even though it teetered on the brink of bankruptcy, once it cleared up that mess it became ready to roll. Since the darkest of those days, the tire maker has risen more than 150%.
Not that there aren't still more challenges that could put more wear on its tread. Rising commodity prices threaten its costs. Oil prices affect as much as 60% of the raw materials necessary to manufacture a tire, while costs for rubber have also gone uphill. However, the unique deal it hammered to allow its union to run the benefits program has ended up becoming a model followed in the auto industry to save the carmakers from ruination. Goodyear still has a large amount of debt it needs to pay down, but with its North American unit still showing surprising strength, the road could be well paved for a further run up.
Not all investors are convinced. BreakerDc, for instance, sees clouds gathering for a "perfect storm" which will break over the tire maker and could equally apply to rivals such as Cooper Tire & Rubber
1. Rubber is already up 14% this year and we still have 3 quarters to go ...
2. Oil, as we all know, has been skyrocketing. This is a minor input for GT compared to rubber but still affects a large portion of their product line.
1a, 2a. No hedging program (that I could find) to handle these commodity risks.
3. Scary scary US auto market and general economy. Auto sales are predicted to be stagnant at best for the next two years ...4. ASIAN INFLATION!!!! Inflation is finally catching up with China's breakneck growth ...
The one bright spot is that US sales are no longer a majority of revenue. ... I am still bearish for the medium-long term though.
Shine your starlight
So is Goodyear ready to burn up the road? Well, at Motley Fool CAPS, every investor's opinion counts. Your voice could determine whether these stocks become shooting stars or supernovas. It's free to sign up and post your thoughts, so why not take your star turn?
