With all the volatility in the markets today, there's no shortage of market seers attempting to call a bottom. 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 out $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 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
|
|
Harvest Energy Trust (NYSE: HTE )
|
*****
|
29.2%
|
46.6%
|
|
Pain Therapeutics
|
*****
|
21.4%
|
47.7%
|
|
CryoLife (NYSE: CRY )
|
****
|
51.7%
|
48.9%
|
|
Susquehanna Bancshares
|
***
|
32.1%
|
67.3%
|
|
Sunoco (NYSE: SUN )
|
***
|
27.1%
|
40.8%
|
Source: Motley Fool CAPS. Price return from July 10 through Oct. 5.
The bottom case
In the case of refiner Sunoco, several signs point to the "bottoming" of the sentiment that this stock is a thing of the past. After falling more than 30% so far this year, some investors see a bargain opportunity in stocks like Sunoco and peers like Western Refining (NYSE: WNR ) . Some of the insiders at Sunoco agree, and they're taking advantage of the discount on shares.
Even Wall Street is warming up to the company. Despite some near-term challenges, Goldman Sachs recently upgraded Sunoco from "sell" to "neutral." While the company has a "relatively simple" asset base, Goldman argued that it no longer deserves to be unfavorably valued. Sunoco's peer Holly also earned an upgrade from "neutral" to "buy." Many CAPS members like the company's long-term potential, and they predict it will benefit in any eventual economic turnaround.
Or dead cat in disguise?
While many investors are bullish on Sunoco, not all are convinced that upside awaits it. In the second quarter, refiners like Sunoco and Frontier Oil (NYSE: FTO ) still grappled with weak demand in a down economy. Oversupply issues are pressuring Sunoco's wholesale margins, and the company certainly isn't counting on the demand for petroleum or chemical products to improve anytime soon. It swung to a loss in the second quarter as revenue fell drastically, much like the refining operations of Hess (NYSE: HES ) .
Like Valero and Tesoro (NYSE: TSO ) , both of which have chopped their budgets, Sunoco announced the indefinite closing of its Eagle Point refinery, since the economy is making profits hard to come by. And much to the dismay of investors who hoped that Sunoco's healthy yield would help with the downturn, the company halved its dividend to preserve capital.
What's your call?
Overall, nearly 91% of the 572 CAPS members rating Sunoco are bullish, believing the company will outperform the broader market. For my part, I believe a recovery in the broader economy is further out than many hope, which is likely to leave the supply and demand imbalance intact.
Ultimately, your own opinion counts most -- CAPS is just there to help you form it. The Motley Fool CAPS database is absolutely free, and you can even add your own insight on any of the 5,300 stocks that our 140,000-plus members have covered. Bounce on over and give it a try.
RSS Headlines
Fool UK