These Cold Stocks Are Heating Up

When a stock's share price is lower than a North Dakota thermometer in February, investors tend to give it the cold shoulder. But as the market warms to a stock's prospects, its price can heat up in a hurry. Alas, you can rarely tell that a stock is melting investors' hearts until after it's made that upward leap.

Taking the market's temperature
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 165,000-plus members, offer a great way to monitor investor sentiment. Following a CAPS rating trend can help us determine the best time to invest. Let's look at previously rated one- or two-star companies that have recently enjoyed a bump in investor confidence and see whether they're truly heating up -- or headed back to the deep freeze.

Source: Motley Fool CAPS. EPS = earnings per share.

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. 

Caution: Contents may be hot
Would it be worth more to your business if your billing system ran more efficiently? athenahealth thinks so, and it's betting that doctors will operate against type to pay up and adopt its Internet-based software.

athenahealth competes against Allscripts-Misys Healthcare Solutions and McKesson (NYSE: MCK). Unlike some rivals, athenahealth charges its customers based on how well its software performs for them, collecting a percentage of revenue received from insurance companies, instead of deriving most of its revenue from the actual sales of software. The company's business requires doctors to take a look at the total cost of the service, since cloud computing reduces doctors' need for expensive systems. Still, doctors are notoriously slow to change, even if the new health-care law creates incentives for a switch to electronic medical recordkeeping (EMR).

athenahealth's stock was slammed after earnings plummeted 80% last quarter, driven by an expensive client acquisition campaign, but CAPS member chowda1229 thinks the medical software specialist is onto something:

The deployment of EMR in physician practices comes down to a simple truth: Primary care physicians have been underpaid for years...as such, they are cash poor. They simply do not have the time nor the resources (affordable and available IT staff) to deploy and maintain a EMR "network" in their offices.... the winning solution WILL BE web based...and the most cost effective, scalable and reliable solution on the market is Athena. 

Walking on clouds
Another company counting on cloud computing to boost returns is Chinese enterprise software developer CDC Software, which just acquired TradeBeam, a software-as-a-service business. In particular, CDC is looking toward a resurgent auto industry, particularly in China, to rev up growth. The acquisition will give the software shop greater access to important industry players like General Motors, Johnson Controls (NYSE: JCI), and Stryker (NYSE: SYK).

CAPS member JaysRage enumerates several key reasons to like CDC Software, but ultimately it comes down to value:

There is a lot to like with this company, and right now it is selling at a significant discount. I was in this one with real money at $9 almost a year ago, and I got out after a nice pop. I'm shocked that I have another opportunity to get into this one under $9. I thought that it was gone for good from a valuation perspective. Welcome back.

Not so threadbare
Moving from the clouds to terra firma, women's clothing retailer Coldwater Creek has been able to maintain support among the CAPS community despite a difficult retail environment. Although it posted a wider loss last quarter than what Wall Street anticipated, it was narrower than the year-ago period, and management says 2010 will be well above expectations.

One of Coldwater's key rivals for consumer attention, AnnTaylor, recently did better than forecast, and analysts are now saying both Chico's FAS (NYSE: CHS) and Coldwater could beat estimates going forward.

With the retailer set to report earnings next week, head over to the Coldwater Creek CAPS page and let us know if this women's clothier still has any fashion sense.

Checking the mercury
Are these stocks invitingly warm or bitterly frosty? 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 hot little numbers, and which offer cold comfort. It's free to sign up.