With all the volatility in the markets today, there's no shortage of market seers attempting to call a bottom. Man of the Year 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 150,000-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 5,400 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 35% below their 52-week high.
|
Company
|
CAPS Rating
(out of 5)
|
13-Week
Price Change
|
% Below 52-Week High
|
|
Sutor Technology (Nasdaq: SUTR )
|
*****
|
26.9%
|
39.3%
|
|
Peregrine Pharmaceuticals (Nasdaq: PPHM )
|
***
|
21.3%
|
41.6%
|
|
AirTran (NYSE: AAI )
|
**
|
21.2 %
|
42.1%
|
Source: Motley Fool CAPS. Results from Nov. 27 through Feb. 22.
The bottom case
Despite the horrid string of losses spewed forth from airlines in recent years, investors see several reasons why the worst may be behind low-cost carrier AirTran today. Things have been improving for AirTran and other airlines recently as the company swung to a profit in the fourth quarter, compared to a loss in the prior year. Similar to Delta Air Lines and United Airline parent UAL, AirTran has seen improvement in business markets as the economic environment has made some progress toward recovery. While others like Delta and American Airlines reported losses for 2009, AirTran managed to pull off record annual earnings in a difficult year, as its lower costs have allowed it to turn profits at the same time it offered cheap fares.
AirTran joined others like Republic Airways (Nasdaq: RJET ) in reporting a rise in traffic in January, and the higher passenger demand prompted Standard & Poor's to boost its rating on the stock. The uptick in travel is consistent with trends that led to another better-than-expected quarter from priceline.com (Nasdaq: PCLN ) and mirror the demand in China that has helped increase sales at Chinese counterpart Ctrip.com (Nasdaq: CTRP ) .
Or dead cat in disguise?
Yet even though AirTran may look spry, an economic recovery isn't expected to come roaring back and consequently the company itself doesn't expect to be putting up huge growth numbers in the near future. While it did see higher traffic in January, its capacity rose quicker, leading to a lower average occupancy. Airlines in general are taking a cautious stance on a recovery, despite the pickup in business travel. While some airlines are taking delivery of just a few new planes this year and Boeing (NYSE: BA ) hopes to begin delivering its Dreamliner later this year, AirTran doesn't expect to add any additional planes to its roster of jets until 2011, given the economic uncertainty. Some CAPS members like the company's position relative to its peers, but the stock sits at a below-average two-star rating in CAPS with many members still leery of opportunity in the airline industry as a whole.
What's your call?
Overall, about 75% of the 354 CAPS members rating AirTran are bullish and see it outperforming the broader market. For my part, given the current competitive environment, I just don't see a lot of opportunity in airline carriers -- even the better ones.
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 5,400 stocks that our 150,000-plus members have covered.
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