5 Cold Stocks Heating Up
By Rich Duprey
August 21, 2009 | Comments (0)
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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 135,000-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.
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.
Reading the mercury
The sheen you see in Ivanhoe Mine's shares is shaded a deep copper hue. That's because it has a $3 billion project in Oyu Tolgoi in Mongolia that may finally see the light of day. Government representatives there are moving to resolve a contract issue it's had with Ivanhoe and its partner Rio Tinto (NYSE: RTP).
Previously, Mongolia wanted 50% of any profits Ivanhoe's copper project realized, as well as imposing a windfall profits tax on the company. While BHP Billiton (NYSE: BHP) didn't give a reason for closing out its Mongolian exploration offices, the inhospitable climate such usurious duties would create had to factor in to their decision.
Yet Ivanhoe recently reported that Mongolia now wants to hold further talks and reach an agreement that is "mutually beneficial, fair and sustainable." No doubt the country wants to get development rolling, now that its coffers have been laid to waste by the worldwide recession, and copper prices seem to be on the rise.
Highly rated CAPS All-Star member alexreising acknowledges the risks here, but figures that closely monitoring developments could end up generating a profit:
This is purely a speculative pick based on the Mongolia contracts. In real life if you are playing this, stay abreast of the news and use stop limits in case talks fall through and just pray it doesn't gap down over your stop.
A miner for a heart of gold
Another speculative mining play would be Nevsun Resources, which had to take on the government of Eritrea as a partner to get its operations greenlighted. But if Ivanhoe Mines ends up enjoying Nevsun's sort of success in its relations with the government, it just might be a profitable venture for all concerned.
CAPS member egensis believes the best mining investments will be found in the junior miners like Nevsun:
Junior miners best way to play gold now, since majors & GLD already fully valued. Even if gold falls in the future, as juniors come of age and start producing, their value will hold, as long as production costs below market value, which seems to be the case for nsu. If gold rises, juniors will soar as they start producing. Co recently obtained financing to carry it to production in 2011.
Nevsun reported a loss in the latest quarter compared with a profit a year ago, but that mostly resulted from unfavorable currency exchange rates. Although shares have fallen 10% over the past month, Nevsun has more than doubled year to date.
Red hot or ice cold?
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 raising the temperature or cooling off in a hurry. It's free to sign up and post your thoughts