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, though some still argue that the worst is yet to come.
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 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 20% below their 52-week high.
|
Company
|
CAPS Rating
(out of 5)
|
13-Week
Price Change
|
% Below 52-week High
|
|
Dynavax Technologies
|
*****
|
45%
|
43.3%
|
|
Coinstar (Nasdaq: CSTR )
|
***
|
31.7%
|
27.5%
|
|
Network Engines (Nasdaq: NENG )
|
***
|
31.5%
|
27.1%
|
Source: Motley Fool CAPS. Results from April 1 through July 2.
Network Engines generated a 47% jump in fiscal second-quarter revenue, gaining increasing volumes of business with its largest customers EMC and Tektronix. Some investors think those expanding relationships will benefit Network Engines' growth, but few CAPS members are weighing in on the company at this point.
Instead, today we'll take a deeper look at Coinstar. Far more CAPS members have provided their outlook for the maker of the fast-growing Redbox movie-rental kiosks.
The bottom case
Investors give several salient reasons why Coinstar may be looking up today, including its healthy growth trend in recent quarters. Coinstar posted more strong financial results in its first quarter, as revenue jumped 46.6% and earnings more than tripled. Several CAPS members see no reason why that outstanding performance won't continue as Redbox gains further momentum.
Coinstar has also been exploring ways to spark renewed growth in its coin-counting machines, offering users retailer gift certificates and other perks. But Redbox remains a driving force behind Coinstar, despite competing kiosk operator NCR's (NYSE: NCR ) plans to install more Blockbuster DVD rental kiosks. Coinstar's management expects to build on its recent traction in part by looking at other growth opportunities, like testing game rentals in one Texas market. The company also plans to lay out a digital strategy later this year, which some CAPS members believe will be an important part of Coinstar's long-term growth.
Or further to fall?
Even though Coinstar has been a hit lately, some investors consider the rising availability of streaming and on-demand movies a threat to the treasured Redbox business. A growing number of Netflix (Nasdaq: NFLX ) subscribers are watching its streaming content, which the company has been making efforts to expand.
And for some investors, Coinstar's need to delay new releases from certain movie studios, including Time Warner's (NYSE: TWX ) Warner Bros., News Corp.'s (Nasdaq: NWSA ) 20th Century Fox, and Universal Pictures, fuels lingering concerns that customers may seek new releases elsewhere. It's no surprise that DirecTV (Nasdaq: DTV ) aims to capture some of that business by greatly expanding its new-release, on-demand offerings this summer. Overall, while the DVD rental business is booming for Coinstar, some investors remain cautious about shifting trends in media delivery.
What's your call?
Overall, 86% of the 365 CAPS members rating Coinstar believe it will outperform the broader market. I think Redbox will have more staying power than many envision, but the stock isn't attractive to me at more than $40 per share.
Still, your own opinion ultimately matters most; CAPS is just there to help you form it. Our Motley Fool CAPS database is absolutely 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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