With all the volatility in the markets, there's no shortage of market-seers attempting to call a bottom. Ben Bernanke called a bottom not once, but twice. Heck, even Keanu Reeves laid out what a world-ending market bottom looks like.
And investors should be buying near the bottom, when pessimism has unduly beaten good companies down to great prices. That's why we here at the Fool -- and 140,000 investors like us -- look to The Motley Fool CAPS community to help sniff out the real opportunities from languishing companies driven by speculation.
Real bottom or another leg down?
Of course, there's no foolproof method of calling a market bottom. But CAPS has a great balance of both quantitative and qualitative resources available on 5,300 stocks, and even a nifty stock screening tool to help investors quickly zero in on potential investment opportunities. Then we can use all the information in CAPS to test whether an individual company has already seen its bottom valuation, or has just primed shareholders for further pain.
I've used the CAPS screener to find $100-million-plus companies that have seen their stock price appreciate by at least 20% in the past 13 weeks even while they remain at least 50% below their 52-week high. These stocks also have a positive return on both equity and earnings per share over the past 12 months. This limits the results to companies that have a history of delivering results regardless of stock gyrations. If you'd like, you can run this screen yourself -- just keep in mind that results may change as the market does.
|
Company
|
CAPS Rating
(out of 5)
|
13-Week
Price Change
|
Below
52-Week High
|
|
Heartland Payment Systems
|
****
|
41.0%
|
62.1%
|
|
Bank of Ireland (NYSE: IRE )
|
***
|
23.5%
|
61.6%
|
|
Alpha Natural Resources (NYSE: ANR )
|
****
|
21.1%
|
61.5%
|
|
Unum Group
|
***
|
31.1%
|
54.2%
|
|
Boston Properties (NYSE: BXP )
|
*
|
20.4%
|
68.8%
|
Source: Motley Fool CAPS. Price return from June 5 through Aug. 31.
The bottom case
Though energy consumption by both consumer and industry is way down thanks to the recession, there are reasons coal miner Alpha Natural Resources may be looking nowhere but up today. After almost being bought out last year by Cliffs Natural Resources (NYSE: CLF ) , Alpha Natural has recently completed its own acquisition of Foundation Coal, which will make it a serious contender as a thermal coal player.
The company now ranks as the third-largest domestic coal mine operator, behind Peabody Energy and Arch Coal (NYSE: ACI ) , and is expected to produce about $4.2 billion in annual revenue while controlling about 2.3 billion tons of reserves. With the prospects for renewed energy demand, Goldman Sachs recently raised target prices on several coal companies, including Alpha Natural, Consol Energy, and Patriot Coal (NYSE: PCX ) , and Alpha Natural tops its list of favorites.
Or dead cat in disguise?
Even though Alpha Natural Resources is seeing opportunities for both savings and growth, the coal market still faces many challenges in the near term. Like Walter Energy (NYSE: WLT ) , Alpha Natural's quarterly results reflected weak demand as it missed earnings expectations with a 77% decline and revenue falling 45% from last year.
It reduced its outlook for metallurgical coal production, while peer International Coal Group also gave a cautious outlook because of weak demand. Although Foundation pulled in a stronger quarter, it's still working with utilities that want to delay deliveries, and further reduced its production plans.
What's your call?
Nearly 95% of the 688 CAPS members rating Alpha Natural Resources are bullish and see it outperforming the broader market. For my part, I see volatility and sluggish demand in the near future, which doesn't have me rushing out to buy a coal company that will be knee-deep in integration activities for months.
But what ultimately counts is your own opinion -- CAPS is just there to help you form it. The best part is that the Motley Fool CAPS database is all free, and you can even add your own insight on any of the 5,300 stocks that our 140,000-plus members have covered -- whether it's related to expired felines or not.
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