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 suggest 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
Conservative management decisions at Comstock Resources have allowed the oil and gas exploration and production company to pay down all of its bank debt in the past year. It's left with just $175 million in long-term debt, compared to the $1.1 billion in equity on its books. With the tough situation in the natural gas industry, the company also plans to drill fewer wells this year. Instead, it will focus most of its attention on the Haynesville Shale region, a place that Chesapeake Energy (NYSE:CHK) believes will eventually outstrip the Barnett and Fayetteville shales.

CAPS member FiddyPop likes Comstock Resources' low-debt profile, and the fact that it operates in some of the same territories as Chesapeake:

[Comstock] is a debt free oil and gas producer, mainly natural gas. They are in some of the main plays with Chesapeake, but [Comstock] doesn't have bank debt (and they don't issue stocks to speculate on emerging plays). This company has been around for a long time, and they do only one thing-Oil and Gas exploration and production. I'm still bullish on natural gas producers.

A general sinking feeling?
Another company in our CAPS sieve is General Maritime, which has recently merged with Arlington Tankers, creating a 31-vessel fleet with contracted revenue of $450 million through 2013. With oil companies scrambling to store oil at sea amid sagging petroleum prices, the number of tankers available for storage has declined. Frontline (NYSE:FRO), for example, is storing 80 million barrels of oil, thereby removing 30 to 35 tankers from delivering cargoes.

While slack demand for oil is causing OPEC to cut production, its action may also help forestall any mutiny that this shipping bounty might bring, encouraging those keeping oil off the market to cash in when oil prices climb. In turn, the increased availability of ships could lower shipping prices.

CAPS member ir4getful thinks General Maritime has proven itself shareholder-friendly, and believes that the merger provides it with a lot of upside potential:

Solid cash flow supporting high yields. Has excellent history of attaining value for shareholders. Merger with [Arlington Tankers] adds upside potential to spot market without diminishing protection of contracted cash flows.

Shine your starlight
Are these stocks burning bright, or collapsing into black holes? 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. Since it's free to sign up and post your thoughts, why not use this opportunity to take your star turn?

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