Are These Stocks Bouncing Back?

However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

There are 125 stocks listed under transportation in the CAPS screener, and we've found more than a few that are well-respected with four- and five-star ratings. Those accolades mean our 165,000-member community is confident these stocks will beat the market in the months ahead. Let's see what members are saying about the ones below:

Company

CAPS Rating
(out of 5)

Recent Price

52-Week
Price Change

Estimated

5-Year
Growth Rate

Diana Shipping (NYSE: DSX  )

*****

$13.29

0%

6%

Frontline (NYSE: FRO  )

****

$30.77

30%

(30%)

Union Pacific (NYSE: UNP  )

****

$77.66

28%

14%

Source: Motley Fool CAPS; Yahoo! Finance.

The markets may be digesting the Fed's pronouncement that it feels the economy is slowing more than previously thought, but with the S&P 500 still up 11% over last year, CAPS transportation stocks performed somewhat better. The average stock is up 17% from the year-ago period. Of course, helping those returns were airlines like US Airways (NYSE: LCC  ) and United parent UAL, both of which more than tripled in value.

Conversely, YRC Worldwide (Nasdaq: YRCW  ) lost 83% of its value and DryShips (Nasdaq: DRYS  ) lost a fifth of its market cap.

So let's take a closer look at why investors think that some of these companies won't be jumping from the frying pan into the fire now that the markets are roiled again.

Some spring in its step
Not all shippers are alike, which explains why oil tanker Frontline is up 30% year over year while dry bulk shipper Diana Shipping is essentially flat and DryShips cratered. The oil markets improved and production in oil-producing states rose in the latest quarter, even though it's still off from the year-ago period, and dayrates for ships have steadily improved despite being lower than where they were 12 months ago.

Highly rated CAPS All-Star KevinKPU says the U.S. drilling moratorium in the wake of the Gulf of Mexico disaster will encourage foreign sources of oil to ship their product here, leaving shippers like Frontline in the driver's seat:

Offshore drilling moratorium will lead to higher oil prices AND more imports....thus shippers are back in control of the supply/demand shipping rate wars.

Bulk shippers, on the other hand, have suffered as inventories of iron ore (a key ingredient in making steel) were depleted, particularly by Chinese steel producers. But indications are that steelmakers have begun restocking their inventories, despite Chinese output dropping almost 4% from June to July, according to China's National Bureau of Statistics. That's helping prop up prices and probably helps explain the Baltic Dry Index's recent rise.

There seems to be a consensus building among CAPS members that Diana is the industry leader, with gtucker7848 calling it the best of breed and Diagoras saying it's "one of the strongest of the shipping companies, and shipping is an industry which will rise overall."

Working on the railroad
Despite declining for the past few months, the ISM manufacturing index shows the economy is still expanding, which has been made evident by the earnings reports of companies that move goods around the country. Railroad operator CSX  (NYSE: CSX  )  and even YRC Worldwide warmed up from business expansion.

CSX isn't the only one expecting growth throughout the year. Union Pacific says even if domestic production slows in the back half of 2010, it will see growth. This is one cool cat that grew revenues 27% in the latest quarter, with profits up 80%. 

Earlier this year, CAPS member fisherus anticipated Union Pacific rising as customers restocked:

This stock has a strong degree of growth potential over the next twelve to eighteen months. After that time it will tend to flatten out due to the profit meeting expectations. It has received heavy profitable revenues through buyers catching up on inventories that have been eroded by the recession.

The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other members on whether you think these stocks are ready to bound higher.

Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey doesn't have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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