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 attractive 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.
I've used the CAPS screener to filter out $100 million-plus companies that have seen their stock price appreciate by at least 15% in the past 13 weeks even while they remain at least 40% below their 52-week highs. 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 the results may change as the market does.
|
Company
|
CAPS Rating
(out of 5)
|
13-Week
Price Change
|
% Below 52-week High
|
|
Satyam Computer Services
|
****
|
24.8%
|
62%
|
|
CardioNet (Nasdaq: BEAT )
|
***
|
18.7%
|
75.3%
|
|
Associated Banc-Corp (Nasdaq: ASBC )
|
**
|
19.2%
|
49.8%
|
Source: Motley Fool CAPS. Price return from July 24 through Oct. 19.
The bottom case
Even with significant uncertainty in the health-care sector today, investors believe CardioNet may have more upside potential than downside risk. The company makes wireless heart monitoring devices that monitor arrhythmic events. It's a pioneer in a segment of the wireless health-care industry that many investors believe has a big future, as more doctors and patients adopt the technology's use. Devices and technology that can remotely monitor a patient's health have potential to improve the health-care system and reduce costs, giving them a potentially significant role in upcoming health-care reform.
The industry has already attracted technology giants such as Qualcomm (Nasdaq: QCOM ) and Intel (Nasdaq: INTC ) , who could help foster the segment's growth. CardioNet saw strong demand for its Mobile Cardiac Outpatient Telemetry (MCOT) service in the second quarter, and it recently made some enhancements to its existing service.
Shares have been beaten down more than 70% year to date, which some CAPS members view as an opportunity to pick up a small-cap stock with lots of promise.
Or dead cat in disguise?
Even though CardioNet would like to one day join the ranks of much larger medical-device firms like Intuitive Surgical (Nasdaq: ISRG ) , Boston Scientific (NYSE: BSX ) , or even Medtronic (NYSE: MDT ) , it recently sustained a major blow to its business model. The company confirmed that Medicare administrator Highmark Medicare Service is cutting its reimbursement for CardioNet's mobile heart technology by 33%. The cuts will have a large effect on revenue and operations.
Because of downward profit projections, shares now trade at a forward earnings multiple in the triple digits. CardioNet also now has lawsuits to contend with, which could provide further distraction going forward. One lawsuit now alleges that the company made positive public statements, even while it knew that reductions in reimbursement rates for its MCOT services were on their way.
What's your call?
Overall, 87% of the 172 CAPS members rating CardioNet are bullish, believing the stock will outperform the broader market. For my part, I think CardioNet remains a high-risk investment, with future growth that is difficult to peg. That makes valuing the company quite difficult.
Ultimately, your own opinion matters most -- CAPS is just there to help you form it. 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.
RSS Headlines
Fool UK