5 Superball Stocks

"'Don't catch a falling knife' ... The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade."

So runs the thesis of my recurring Fool column "Get Ready for the Bounce," in which we search among the wreckage of Mr. Market's overturned cutlery drawer, hoping to find future winners in a pile of 52-week losers. But do we really need to sit around for a whole year, waiting for a potential bouncer?

I say nay. Sometimes, stocks fall far in far less time than a year -- and like a superball dropped from the balcony, the harder they fall, the higher they bounce. Today, we're going to look at a few equities that've suffered dramatic drops over the past week. With a little help from the 130,000 members of Motley Fool CAPS, we hope to find an opportunity or two for you:

Stock

How Far From
52-Week High?

Recent
Price

CAPS Rating
(Out of 5)

United States Natural Gas  (NYSE: UNG  )

-79%

$13.80

*****

Suntech Power  (NYSE: STP  )

-70%

$13.93

****

Regions Financial (NYSE: RF  )

-79%

$3.83

**

Capital One (NYSE: COF  )

-63%

$22.64

*

Zions Bancorp (Nasdaq: ZION  )

-73%

$14.49

*

Companies are selected by screening on finviz.com for abrupt 10% or greater price drops over the past week. Recent price data and 52-week high provided by finviz.com. CAPS ratings from Motley Fool CAPS. Data as of May 26, 2009.

Five super falls, one superball
As the table above demonstrates, last week was a rough one for financials, which crowd the bottom half of our rankings (and perhaps rightly so.) But while Fools take a dim view of companies that incinerate money -- and investors -- they're considerably more optimistic on cleaner forms of creating energy. Alternative-energy pioneer Suntech Power, for example, gets very high marks from CAPS members.

Almost as high as the five-star rating accorded to this week's top stock: United States Natural Gas.

The bull case for United States Natural Gas
First things first: USNG is not, in fact, a stock at all. It's an exchange-traded fund "designed to track in percentage terms the movements of natural gas prices." Buy shares of Chesapeake Energy (NYSE: CHK  ) or Anadarko (NYSE: APC  ) , and you'll own yourself part of an honest-to-goodness company, busy pulling gas out of the ground. In contrast, USNG is a bit of an artificial construct representing the price of the gas itself.

But there's nothing artificial about investors' enthusiasm for nat-gas. CAPS member DanePymble calls USNG a "good play on US natural gas prices, a cleaner alternative to oil and a commodity that has yet to really bounce along with other's such as oil, copper etc."

All-Star investor rdpatton agrees: "Natural gas is in a major trough. Huge number of rigs have been laid down. It is a "cleaner" fuel than coal and we have lots of it in the US. As economic activity picks up along with inflation this will double within a year or two."

Or perhaps even sooner. Fellow All-Star jdawg1847 is witnessing "Massive natural gas short covering" in the market right now. And this All-Star further points out that in contrast to some of the more troubled "real" companies in our economy, "nat gas is not going to zero." (Although come this winter, a lot of us homeowners will be wishing it would.)

Are these investors right? I really haven't a clue. As I wrote back in December, the wild fluctuations in prices for natural gas ... and oil ... and corn ... and most everything else classed as "commodities" flummox and amaze me.

That said, when I predicted in January that the multi-year low we were seeing in oil prices could not hold forever, it didn't take long for me to be proven right. After bottoming 77% below its high, the price of crude has surged -- nearly doubling over the course of just a few months. I have to say that this sounds propitious, seeing as USNG is as bad off today as oil was back then --trading 74% off its high. Whereas it cost you nearly $14 to buy a million BTUs of natural gas last summer, today that can be had for $3 and change.

But not for long.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about United States Natural Gas -- or even what other CAPS players are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.

Suntech Power Holdings is a Motley Fool Rule Breakers recommendation. Chesapeake Energy is an Inside Value recommendation.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 657 out of more than 130,000 members. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 27, 2009, at 7:50 PM, supersnooper58 wrote:

    I'm not too happy about gas drilling messing up the environment up here in PA. It's polluting the air, land, and ground water.

    The technology they use is unsound/unsafe, and with luck, Mz. Jackson of the EPA will have all those rules and regulations that Mr. Cheney had exempt from the Clean Water Act reestablished.

    So, if I were to invest in anything - it sure wouldn't be this type of energy.

    btw, do you know that this is the only industry that has this type of exemption from the CWA.....

    reality is setting in down in DC, so don't hedge your bets on this investment.

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