With all the volatility in the markets today, 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.
Investors should consider buying stocks after a big decline, when pessimism has unduly beaten good companies down to great prices. That's why we here at the Fool -- and 140,000-plus investors like us -- look to the Motley Fool CAPS community to help sniff out the real opportunities from languishing companies driven by speculation.
A real bottom, or another leg down?
Of course, there's no foolproof method for timing 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. Once we've rounded up our candidates, we can use all the information in CAPS to test whether each company has already hit bottom, or simply primed shareholders for further pain.
I've used the CAPS screener to filter for $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 40% below their 52-week high. These stocks also have both a positive return on equity and positive earnings per share over the past 12 months; these criteria limit the results to companies that have a history of delivering results, regardless of stock gyrations. If you'd like, 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
|
|
Cascal
|
*****
|
66.9%
|
41%
|
|
Precision Drilling Trust
|
*****
|
35.6%
|
50.6%
|
|
Almost Family (Nasdaq: AFAM )
|
*****
|
32%
|
42.5%
|
|
Rentech (AMEX: RTK )
|
***
|
220.4%
|
41%
|
|
PNC Financial Services (NYSE: PNC )
|
**
|
26.2%
|
40.2%
|
Source: Motley Fool CAPS. Price changes for the 13 and 52 weeks ended Sept. 28.
The bottom case
Investors aren't alone in calling a bottom on PNC Financial Services; the CEO of the diversified bank thinks things are looking up these days as well. While recently speaking at a Barclays (NYSE: BCS ) conference, PNC CEO James E. Rohr said he sees more revenue opportunities as the economy improves, and indicated that credit problems are slowing as the company successfully manages risk.
PNC's making progress toward integrating its National City acquisition, and it expects to realize cost savings of more than $1.2 billion in the first two years of the takeover. Like SunTrust (NYSE: STI ) , Regions Financial (NYSE: RF ) , and Bank of America, PNC also seeks to boost earnings by repaying its TARP money as soon as it gets the go-ahead from the government. In the third quarter alone, PNC paid $95 million in preferred dividends to Uncle Sam.
A dead cat in disguise?
Even though investors and management are singing a bullish tune, PNC, like Huntington Bancshares (Nasdaq: HBAN ) , still faces the lingering issue of non-performing loans on its balance sheet. The sticky little buggers rose 36% to $4 billion in the second quarter, and the company expects to continue to build its loan loss reserves in the third quarter. Despite a recently lifted price target, an FBR analyst said PNC is still shouldering plenty of risk from expected losses in its portfolios, which could still rear their ugly heads if the economy worsens from here. PNC and other banks may also have to wait months to buy their way out of TARP, since officials aren't expected to grant the next wave of approvals until late in the year.
What's your call?
Overall, roughly 69% of the 488 CAPS members rating PNC Financial Services are bullish, believing the company will outperform the broader market. For my part, I agree with the many investors hedging on financial firms today. The bullish scenarios may largely assume an improving economy, but I don't.
Ultimately, though, your own opinion counts most. CAPS is just there to help you form it. Best of all, 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.
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