When a stock's share price is lower than the mercury in a North Dakota thermometer in February, investors tend to give it an icy stare. 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 of 180,000-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 low-rated companies that have recently enjoyed a bump up to the top tiers in investor confidence and see whether they're truly heating up -- or headed back to the deep freeze.
CAPS Rating (out of 5)
EPS Growth Next Year
Ford (NYS: F)
Zalicus (NAS: ZLCS)
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.
Caution: Contents may be hot
I think it's time to close out my underperform rating on CAPS for Ford. Although my short-term thesis has worked out -- namely, that the auto industry would stumble after the Japanese earthquake-tsunami disaster (and Ford's shares are almost 20% lower than when I first rated the stock) -- now is the time to see the company is gaining traction.
It's been four years since any single automotive brand sold more than 2 million units in one year, but Ford was the first to do it again and it has beaten out General Motors (NYS: GM) for the second consecutive year as the top carmaker in Canada. The industry is starting to expand with Ford planning on spending over $1 billion to retool a Kansas City plant. Flush with cash from a profitable run last year, it's also reinstituted its dividend. It may now be a smaller, more focused automaker, but Ford is proving to be a winning company and investment.
Strong cash position, diversified international assets, & on the rise in an industry waiting to pop as people look to replace aging cars as the economy gradually improves.
I'll be rerating Ford to outperform the markets over the next few years, but let us know in the comments section if you agree it's not only on the road to recovery, but is only waiting to fully open its engines. Then add Ford to your Watchlist to see if it can continue to profit as it has.
Biotech Zalicus has one product on the market, Exalgo, which is an extended-release formulation for pain management, one it shares with Covidien (NYS: COV) . Its most advanced pipeline product is Synavive to treat immuno-inflammatory disorders, which is progressing to late-stage trials, and it has two other drugs in early-phase testing.
For that reason, there doesn't appear to be much on the horizon for Zalicus that would provide a catalyst for growth. Yet analysts are bullish on its prospects and all 12 Wall Street analysts following the biotech see it outperforming the broad market indexes. CAPS member k2merlinsix points to reports of Novartis filing patents related specifically to Zalicus as the all the catalyst it needs to get itself moving:
[Zalicus] is growing their pipeline. The start of two Phase I ion drugs in addition to Synavive in Phase 2b and Prednisporin entering into Phase III studies for conjunctivits and lastly Novartis filling 3 patents and a pending 4th application that explicitly call out the use of [Zalicus] cHTS technology shows plenty of momentum in this little stock and a very bright future as these drugs and partnerships mature.
Add Zalicus to the Fool's free portfolio tracker to keep track of its progress, and let us know on the Zalicus CAPS page whether you think the odds of further gains are in its favor.
Checking the mercury
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At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Ford Motor.Motley Fool newsletter serviceshave recommended buying shares of Covidien, General Motors, and Ford Motor.Motley Fool newsletter serviceshave recommended creating a synthetic long position in Ford Motor. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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