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 165,000-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.
I've used the CAPS screener to filter for $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 30% below their 52-week high:
|
Company
|
CAPS Rating
(out of 5)
|
13-Week
Price Change
|
% Below 52-week High
|
|
Federal Agricultural Mortgage (NYSE: AGM )
|
***
|
44.3%
|
43.2%
|
|
Array BioPharma
|
***
|
27.1%
|
31.4%
|
|
Delcath Systems (Nasdaq: DCTH )
|
*
|
85.1%
|
34.2%
|
Source: Motley Fool CAPS. Results from March 12 through June 7.
Shares of cancer therapy system developer Delcath Systems took a big hit after presenting data at the American Society of Clinical Oncology meeting in Chicago. However, the stock has risen dramatically over the past few months, as its drug delivery system showed positive results in a late-stage trial.
CAPS members are more divided on the market-beating potential of higher-rated Federal Agricultural Mortgage, so let's dig a little deeper there.
The bottom case
While Farmer Mac's shares have pulled back from a huge run recently, CAPS members have bumped the stock's rating up a couple of notches, citing a number of reasons why shares may be looking nowhere but up. The company has been positioning itself for growth, raising more capital in the first quarter and teaming up with regional investment firm Morgan Keegan to market its programs to commercial banking clients.
And many investors see bigger potential for recovery in the area of agriculture than in traditional residential real estate. Major agricultural lender MetLife said it has maintained strong agricultural lending, despite agricultural real estate weakness last year. And the Federal Reserve Bank of Kansas City recently said that U.S. central plains farmland has risen in value, driven in part by farmer demand. The outlook from farm equipment manufacturer Deere (NYSE: DE ) , which reported stronger-than-expected demand in the U.S. and South America, and which estimates growing farmer income this year, dovetails with this data. All this evidence suggests good opportunities ahead for Farmer Mac's business.
Or further to fall?
Yet even though Farmer Mac seems poised to retest highs, its balance sheet still holds plenty of risk for investors to consider. Although it's not in as bad of a position as government-sponsored peers Fannie Mae (NYSE: FNM ) and Freddie Mac (NYSE: FRE ) -- which both recently requested more government money after each posted multibillion-dollar quarterly losses -- its loan delinquencies are up from the end of last year, and it anticipates that those numbers could be more than the historical average in the near future.
And with mixed results coming from fertilizer companies, not everyone is convinced that an agriculture industry rebound is at hand. PotashCorp (NYSE: POT ) reported higher demand and expects a longer-term rebound, but peer Mosaic (NYSE: MOS ) missed analysts' quarterly estimates. Shares of both companies have fallen since their latest results, and some analysts remain cautious on the sector going forward, leaving growth prospects for Farmer Mac less than certain for many investors.
What's your call?
Overall, about 71% of the 64 CAPS members rating Farmer Mac are bullish; they see it outperforming the broader market. For my part, the farther I stay away from federally chartered corporations, the better.
But ultimately, your own 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 5,400 stocks that our 165,000-plus members have covered.
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