Unloved Stocks Ready to Shine

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 120,000-plus members, 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. Data suggests that CAPS' highest-rated stocks performed best while the lowest-rated did worst, so let's look at previously rated one- or two-star companies that have recently enjoyed a bump in investor confidence and see whether the stars are really aligning in their favor.

Sources: 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. 

The sun's always shining somewhere
Just not over the chip industry lately. Following Intel's (NASDAQ:INTC) doom-and-gloom forecast for the coming year, Advanced Micro Devices issued its own doomsday scenario. While demand has been reportedly falling across "all geographies and businesses," CAPS member spkinney1 sees reason for hope in AMD's new management: "New CEO focusing on strengthening the balance sheet and improving margins which should help out on growing net income."

Johnson & Johnson (NYSE:JNJ) is proving there's still a lot of industry interest in scooping up wounded pharmaceutical partners. Perhaps Amylin Pharmaceutical might itself qualify, considering the impact that safety concerns over Byetta have had on its stock. Many Amylin investors would probably agree with CAPS member biopharminvestor, who finds the market's response over-the-top:

Overreaction to the pancreatitis deaths (6). Diabetes space was hammered starting with Exubera withdrawal and other insulin or ODA's (perceived) safety problems. When this passes, the diabetes space will be more fairly valued. A huge growing epidemic that is poorly served by existing treatments.

As if cruise ship operator Royal Caribbean Cruises didn't have enough to worry about, amid a weak economy that's drying up discretionary spending, it may now have to contend with piracy as well. The threat of pirates attacking cruise ships could further dampen customers' enthusiasm. Yet with about $2 billion in debt due next year, and discounts being pushed to keep berths filled, one of Royal Caribbean's cruises might prove a better deal than its shares.

CAPS member Landsman55 has a different view. He sees the all-inclusive nature of a cruise as being an attractive inducement to cash-strapped consumers:

Forget the cheap P/E in current play and assume that earnings drag for several years. If you've taken a cruise aboard then you'll notice how many repeat customers they have and this is an all-in vacation that is attractive to many people who want without indeterminate costs. This type of vacationing will expand dramatically post the current crisis, especially if folks can't splash out the way they did in prior years.

Shine your starlight
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 or supernovas. Since it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?