By
Jordan DiPietro
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September 1, 2010
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The second quarter of 2010 has been a bad one.
The broad market has declined by about 5% over the past six months, and because small-cap stocks are generally more volatile, they've experienced a bit of a greater drop. That's almost to be expected. However, what's interesting is that large-cap stocks have actually fallen a slight bit more than the broad index -- and these are the billion-dollar companies that usually hold up well in a recession or a double dip.
The good news is that now the market is ripe for cherry-picking. Hundreds of small and large successful companies have gotten hammered as of late, and that means there are some great value plays to be had.
In order to get you started, I've screened for health care stocks that have dropped significantly over the past 13 weeks and that are trading for very low price-to-earnings and price-to-sales ratios. In addition, we've utilized our 165,000-strong CAPS investing community to select only the best of the best, those companies with either a four- or five-star ranking. Here are the seven companies that have dropped the most:
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Company
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13-Week Price Change
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P/E Ratio
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P/S Ratio
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Kendle International (Nasdaq: KNDL )
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(38.8%)
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8.4
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0.24
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LHC Group (Nasdaq: LHCG )
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(32.9%)
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7.9
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0.65
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Community Health Systems (NYSE: CYH )
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(31.9%)
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9.3
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0.20
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Almost Family (Nasdaq: AFAM )
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(30.2%)
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8.1
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0.73
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Universal Health Services (NYSE: UHS )
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(25.3%)
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12.3
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0.57
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Medical Action Industries (Nasdaq: MDCI )
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(24.7%)
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9.2
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0.47
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GentivaHealth Services (Nasdaq: GTIV )
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(22.5%)
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12.3
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0.54
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Source: Motley Fool CAPS. Data as of Aug 30. Price change since June 4.
Of course many times cheap companies are cheap for a reason -- they're experiencing greater competition, they cannot sustain revenue or earnings growth, or possibly they suffer from poor management.
However, every once in a while, especially during uncertain times, you can find some real gems for dirt cheap prices. This is just one simple step in the process, so make sure to do your own due diligence on each of the companies listed above.
Have a strong opinion -- head over to CAPS and let your voice be heard!
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