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 125,000-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.

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.

The sun's always shining somewhere
The restructuring under way at Sonus Networks continues apace since the current president and CEO of the IP communications infrastructure provider landed there last year. A number of executives have left the company, and last month it announced a 5% workforce reduction in recognition of the current economic and market landscape.

With no debt and more than $113 million in the bank as of September, top-rated CAPS All-Star TSIF thinks there needs to be only a ripple to create a wave that will allow Sonus to crest higher.

January effect the last few years has been less pronounced...but...Change in managment and restruction on options...but they have promised this for over two years. Network infrastructure under attack, needing some upgrades, as promised by Obama's infrastructure plan.

No debt, cash in the bank, insiders need to get stock price back up now or see their retirement flushed. Possible buyout play, but unlikely. Small shift in margin could tip this back positive. Not one to bet the lunch money on, but for $1.50 per share you could skip lunch and buy a few and maybe buy a good dinner instead some day...

Plenty of room at the inn
According to industry watcher Smith Travel Research, hotel occupancy over the holidays suffered a 16% decline while luxury space like that offered up by Wyndham Worldwide was down 24%. That was coupled with a 35% drop in revPAR (revenue per available room). While that would normally be gloomy news, the report that investor Sam Zell wanted to up his stake in Starwood Hotels & Resorts (NYSE:HOT) helped buoy investor confidence in the industry. Even Marriott (NYSE:MAR), which owns very few of its own hotels, bounced higher.

Although the industry as a whole isn't expected to see much of a recovery until 2011, CAPS member ErikMonsen thinks Wyndham's time-share operations will help keep them afloat.

I work for Wyndham Vacation Resorts- it's the timeshare part of Wyndham, that accounts for 40% of our earnings. We have hit hard times, and they had to make a few cutbacks, but i'm glad they laid some people off instead of pussyfooting around about it and not knowing what to do. They really know their business well, and I receive company wide emails from the CEO and it seems like we are weathering the storm well.

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

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.