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 145,000-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 15% in the past 13 weeks, even while they remain at least 40% below their 52-week high. 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
|
|
Akorn (Nasdaq: AKRX )
|
****
|
24.8%
|
46.2%
|
|
iStar Financial (NYSE: SFI )
|
***
|
15.8%
|
40%
|
|
Sunrise Senior Living (NYSE: SRZ )
|
**
|
41.8%
|
44.1%
|
Source: Motley Fool CAPS. Price return from Aug. 28 through Nov. 23.
The bottom case
Stock in Sunrise Senior Living has been quite volatile, but many investors see several reasons why the company's worst days may be past it. Sunrise has been making progress in restructuring its finances and operations, and its survival plays an important role in the senior housing industry, since it operates many health care facilities owned by REITs such as Ventas. It recently sold a portfolio of communities to Brookdale Senior Living, which will help pay down some debt, and it's cut expenses and restructured operations to save cash. The company's also working with some of its major lenders to extend maturity dates and refinance some debt that's soon coming due.
Some investors think that an aging baby boomer population could boost long-term demand for Sunrise's services. They also expect companies that provide services or meds, like WellPoint (NYSE: WLP ) , Amedisys (Nasdaq: AMED ) , UnitedHealth (NYSE: UNH ) , and Merck (NYSE: MRK ) , to benefit from increasing demand from seniors.
Or dead cat in disguise?
Even though Sunrise may look spry, its recent quarterly earnings report shows weakness in the company's performance and the industry as a whole. Steep housing-price declines have made seniors reluctant to sell their homes and move into managed-care facilities. Also, a number of assisted-living facilities across the nation are facing the pressures of rising health-care costs and restrictive Medicaid budgets. Many seniors are finding it more difficult to pay the fees, adding further pressures to Sunrise's operations.
The company reported a net loss with falling revenue, and shareholders punished shares after the report. Many worried about the possibility of bankruptcy, which the company itself warned of earlier this year. At the end of the third quarter, $411.9 million of Sunrise's debt was in default, and another $192.8 million was due within one year. Although the company has been unloading assets to help its financial situation, some CAPS members see it as just a short-term fix. The company's CAPS rating has recently plummeted from five stars to two.
What's your call?
Overall, 87% of the 482 CAPS members rating Sunrise Senior Living are bullish, expecting it outperforming the broader market. For my part, I have to side with the bears -- there's just too many forces working against Sunrise to justify a bet that the operator will pull out of its tailspin.
But ultimately, your opinion counts most; 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 145,000-plus members have covered -- whether it's related to expired felines or not.
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