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 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 in investor confidence to the top tiers and see whether they're truly heating up -- or headed back to the deep freeze.
Source: Motley Fool CAPS.
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.
A chip on its shoulder
Axcelis Technologies' fourth-quarter results back in February were in line with management's expectations, proving that when you set your sights low enough, you can walk over any hurdle.
The semiconductor equipment maker saw revenue plunge 17% from the previous quarter and saw a profit of $1.2 million in the third quarter of 2011 turn into a $2.1 million loss, which included a $900 million charge related to European tax audits. And though investors can never count on backlog translating one-to-one into new business, new systems backlogs plunged 80% from 2010.
Although it would be tempting to say Axcelis' results were an aberration when Applied Materials (NAS: AMAT) reported record revenues and cash flows last year, which allowed it to announce a big buyback program and up its dividend 13%, Cree (NAS: CREE) , ChipMOS Technologies, and quite a few other players in the space have run into a wall with their businesses.
But there may be a reason Axcelis' stock is rising in the estimation of investors, following the big CMOS chip order it scored last October and the follow-on order from a top semi manufacturer for one of its plasma dry strip systems.
With 89% of the CAPS members rating the equipment maker outperform, it seems they believe those wins will start paying dividends of their own. Tell us on the Axcelis Technologies CAPS page if you think it will continue chipping away at the naysayers, then add the stock to your watchlist to see how the smartphone trend plays out.
A crude assessment
When the mad rush starts, maybe it's time to step back and reassess whether you want to follow the herd. All we hear about today is how oil and gas companies are abandoning the dry gas market in favor of oil and natural gas liquids. From Chesapeake Energy to Denbury Resources (NYS: DNR) , the warmer weather and lousy economics of dry gas are leading them ever further into liquids. But the stampede seems to be showing up in lower prices.
Although liquids have historically offered better pricing, and that's no different today, Denbury was one that saw softness start to enter the equation last quarter. Not that it's kept it from being hopeful about its production schedule. Magnum Hunter Resources, which is in the process of acquiring even more acreage in the Williston Basin, took advantage of the warmer weather and saw its output triple in the first quarter. Oasis Petroleum doubled its output.
My concern is that now with NGLs being the "obvious" place to drill for everyone, will we see a collapse in that market -- and if not quite as bad as the dry gas market's plunge, then a precipitous one nonetheless?
While CAPS member dblshot sees the quality of Magnum's management team ultimately leading it to a buyout over the next few ears, I've rated the oil and gas play to underperform the market because I think everyone's pell-mell rush into the space will weaken it.
Add Magnum Hunter Resources to the Fool's free portfolio tracker to follow whether everyone will end up all wet from the new gold rush.
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 Denbury Resources.Motley Fool newsletter serviceshave recommended buying shares of Chesapeake Energy. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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