5 stocks ready to heat up
The collective wisdom of an online community finds out-of-favor companies that could command more respect.
By Rich Duprey, The Motley Fool
When a stock's share price is lower than a North Dakota thermometer in winter, 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 MSN CAPS' proprietary ratings, aggregated from the experience and knowledge of 140,000-plus participants, offer a great way to monitor investor sentiment. Tracking a CAPS rating trend is one way investors can determine the best time to buy a stock.
Let's look at a handful of companies that not long ago had paltry one- or two-star ratings at CAPS but recently were bumped up to three stars as investors warmed to their prospects.
Here are five such stocks:
- Best Buy (BBY), the nation's biggest outlet for consumer electronics, could have a cheerful holiday season, selling products that people need to stay connected.
- Bronco Drilling (BRNC) reported increased oil and natural gas drilling in October, with 31% of its drilling fleet in use, up from 24% the previous month. Drilling rates increased by $5 month last month, and were up $495 from the daily average for the third quarter.
- Home Depot (HD), operator of the world's largest home-improvement chain, has been cutting costs in an attempt to offset weakness in the housing and renovation markets. The company and some analysts see signs that the housing market is stabilizing, a precursor to a resumption of revenue growth.
- Microvision (MVIS) makes display and imaging technology that helps doctors perform eye surgery and enhances the experience of 3-D computer games. The company also boasts a miniature projector capable of producing high-resolution images in mobile phones, digital music players and other electronics devices.
- Whole Foods Market (WFMI) operates the nation's largest chain of natural foods stores. The company said sales momentum improved in October after five consecutive quarters of declines. But ongoing competitive price pressures and consumer worries about the economy have weighed on investors.
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 you should, too.
Small is beautiful
Just as private-label manufacturers have created a hot niche in the grocery aisles, Microvision is encountering success in getting its microprojectors purchased by an Asian original equipment manufacturer that contracts to make private-label electronics.
Microvision's "pico" projector essentially converts a mobile phone into a big-screen projection device, and it could wind up in an increasing number of hand-held electronic gadgets. The Redmond, Wash., company faces competition in this market from Texas Instruments (TXN).
Microvision last month signed up a distributor in Europe, which will supply the projector to a top mobile phone operator. There seems to be some big things happening around this small company.
"This Company is going to bring out a breakthrough mobile microprojector with really unstoppable technical specifications," the CAPS participant wrote. "I'm watching them for over a year now and the more details I get the more I think that this stock will explode in the next six months and later on rise for the next couple of years."
Why not add your opinion to Microvision's CAPS page and let other investors know you think it will project itself to bigger and better things?
Up and down the food chain
Even if I agree with some of the opinions of Whole Foods CEO John Mackey on the health-care debate, that doesn't mean I think it's time to stock up on the grocery company's high-priced stock. Mackey says the company has turned the corner on the recession, but Wal-Mart (WMT) remains a tough competitor.
The stock's valuation is no picnic, trading at nearly 22 times forward earnings estimates, and analysts expect around 16% profit growth for the next half-decade. Wal-Mart, with only slightly less robust 12% growth estimates, is trading at just 13 times next year's earnings.
Many times you can't separate a company from its charismatic chief executive. Think Steve Jobs at Apple (AAPL) or Microsoft (MSFT) co-founder and ex-chief Bill Gates. According to CAPS participant "Tomcat1066," it's Mackey who makes or breaks Whole Foods:
"Two words: John Mackey, their CEO. He built the company and has helmed it through out the company's existence," Tomcat 1066 wrote. "He has a good head and good ideas that will pan out well for Whole Foods."
Use the comments section in the CAPS Whole Foods page to tell us whether investors should dine on the grocer's stock or if it should be scraped into the waste bin.
Are these stocks invitingly warm or bitterly frosty? Log on to CAPS and let us know what you think. Your opinion makes a difference.
The ratings and comments from CAPS members aren't always on the money, but there's value in a system that incorporates the knowledge, information and skills of thousands of participants. As wisdom-of-the-crowd experiments show, collective estimates are often superior to the estimates of most individuals.
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