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.
CAPS Rating (out of 5)
EPS Growth Next Year
Cerus (NAS: CERS)
Chico's FAS (NYS: CHS)
Source: Motley Fool CAPS; NM = not meaningful.
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
The question for investors when it comes to blood cleaning systems specialist Cerus is how long will it take to get approval for its technology here in the U.S. and whether using its system for transfusions will gain traction.
Cerus' Intercept system is approved for use in countries such as France, Austria, Russia, and Saudi Arabia. Developed in collaboration with Baxter International, the Intercept Blood System causes pathogens in the blood -- bacteria, parasites, and viruses -- to become inactive during transfusions. The 56% increase in sales it saw in the first quarter were largely driven by demand for the system as pricing remained stable, but it was still recording losses on the bottom line. Its CEO says that could change if the company could hit around $60 million in Intercept sales, and with trailing revenues at $35 million, it would have to maintain this growth rate for about a year to achieve that. Add in getting the system used for blood transfusions, though, and the time leap to profitability could significantly narrow.
FDA approval is still a long time off, however, as the treatment is only in early stage testing, and even if it made it through the gauntlet, it would find itself going up against Novartis' (NYS: NVS) blood-screening system, which examines 80% of the donated blood supply in the United States. Investors considering the stock should base their decision on its expansion plans for the treatment of blood plasma and platelets alone.
I've rated Cerus to outperform the market, because it has been successful in getting the Intercept system introduced in new markets, which should help it achieve its growth goals, but tell us on the Cerus CAPS page if you think it will get the market's blood pumping, and then add the stock to your Watchlist to see whether the stock goes through a bloodletting process.
Chico's FAS, meanwhile, has been growing its top and bottom line. Sales were up 20% in the fourth quarter, crushing analyst expectations, with profits up 36% from the year-ago period.
While retailers in general are feeling more confident, the women's market is looking particularly robust. Motley Fool writer Helen Hagan says the management team that took over a few years ago at Chico's has put the company on the right track: "Chico's growth strategy is to focus on building its store base, improving productivity and growing its direct-to-consumer channels, as well as by building loyalty across each brand. Unlike many of its competitors, the company focuses on smaller, more intimate venues and on relationship building with its customers."
With 87% of the CAPS members rating Chico's to outperform the market, it's clear they think there's a plus-sized opportunity to profit here. Add the women's clothier to the Fool's free portfolio tracker to follow whether the sector optimism is warranted.
Checking the mercury
Are these stocks invitingly warm or bitterly frosty? The Motley Fool has identified rock-solid investments that could lead you to a secure financial future. The report is free, but it's available only for a short time, so ask for your copy today and find out which dividend-paying stocks made the cut.
At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of Novartis. The Motley Fool has adisclosure policy. We Fools don't 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.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.