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 115,000-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, tracking 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
|
Recent Price |
Next Year Projected Earnings Growth |
|---|---|---|---|
|
Boyd Gaming |
*** |
$13.87 |
1% |
|
Bank of New York Mellon |
*** |
$37.45 |
17% |
|
BJ's Restaurants |
*** |
$12.72 |
25% |
|
OpenWave Systems |
*** |
$1.46 |
141% |
|
Smurfit-Stone Container |
*** |
$5.06 |
269% |
Source: Motley Fool CAPS, Yahoo! Finance.
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.
Aces and eights
The vice squad of investing -- those investors who hunt down so-called "sin stocks" like gambling, guns, and tobacco because of their ability to stay strong during a recession -- have been worried that even these stalwarts of the down market might not hold up this time.
Top-rated All-Star CAPS member stevebk01 took a look at casino operator Boyd Gaming and felt that the twin evils of a recession and higher gas prices would be a losing bet:
The gaming sector is in big trouble. Aside from the fact that people are traveling less and have been forced to tighten their spending, Gov. Arnold cutting all of the temp. work force in Cali and lowing 22,000 stat jobs to minimum wage last week can not possibly help traffic to Vegas. I know booze and gambling are (jokingly) good investments during tough times, but if there is no money to gamble with if there is no money to begin with.
Shortly before that pitch was written, Boyd had told analysts that third-quarter earnings would be below analyst expectations, it would delay its Las Vegas project, and its dividend would be suspended. However, a few days later, the market rallied around the gambling sector when MGM Mirage
Subprime? What subprime?
The saying that one bad apple spoils the barrel applies just as aptly to the financial markets as anywhere else. Bank of New York Mellon has felt the angst of investors worried about subprime lending and exotic financial deals, but the institution, which traces its roots back to Alexander Hamilton, has little exposure there.
CAPS member smacke01 feels that opportunity occurs when the market makes indiscriminate decisions. This member sees a recovery ahead for the sector and says Bank of New York stands to benefit: "[Bank of New York Mellon] was bundled with subprime owning other financial companies. Truth is [Bank of New York Mellon] doesn't have any of that bad debt exposure and will hugely benefit in upcoming financial sector recovery."
While it might not have exposure to the subprime lending fiasco, it might have marketed some auction-rate securities (ARSs) that were often touted as being "as good as cash" until they inevitably weren't. Then investors who had bought auction rate securities found out they couldn't get their money out when they needed it. Now Bank of New York Mellon says that a unit is under investigation for how it marketed those securities, and others like UBS
Between such settlements and the creation of a new type of vehicle to extricate investors from these securities, there just may be a light at the end of the tunnel that's not an oncoming train.
Shine your starlight
So are these stocks driving ahead or ready to crash? 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 shooting stars and supernovas. Since it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?
