Can These Stocks Bounce 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 166 stocks listed under "industrial" in the CAPS screener, and more than a handful of them carry well-respected four- and five-star ratings. Those accolades signal our 170,000 CAPS members' confidence that these stocks will beat the market in the months ahead. Let's see what members are saying about the ones below:

Source: Motley Fool CAPS; Yahoo! Finance.

The markets may be feeling better about the economy, now that a few reports have offset much of the drumbeat of negativism we've seen. With the S&P 500 up 10% over last year, CAPS industrial stocks have done much better. The average stock is up almost 28% from the year-ago period.

Those returns got a boost from performances like those of Cummins (NYSE: CMI), up 130%, and Caterpillar (NYSE: CAT), which rose 55% year over year. On the other hand, A-123 Systems (Nasdaq: AONE), down 52%, and RINO International (Nasdaq: RINO), which lost almost 78% in the same period, joined Harbin and SmartHeat above in dragging down the market's overall performance.

Now that the markets are roiled again, let's see why investors think that some of these other companies won't be jumping from the frying pan into the fire.

Some spring in its step
Like RINO and a disappointing parade of Chinese small-cap stocks before it, Harbin Electric has come under close scrutiny, as questions about the veracity of its financial statements continue to haunt the small motor maker. Its CEO wants to take Harbin private again, but finding a partner to help him is proving difficult.

Unlike many investors, though, the analysts at Global Hunter don't think that private-equity firm Baring bailed out of its deal with Harbin because of any lack of confidence in its management. Global Hunter has upgraded shares of Harbin Electric to a buy, saying the beaten-up stock price is a purchasing opportunity. That would jibe with the nearly 500 CAPS members who've rated Harbin to outperform the market, but only you can determine whether the motor maker is right for your portfolio.

Add it to your stock watchlist, and let us know on the Harbin Electric CAPS page whether it can jumpstart its growth engine again.

Driving a bargain
No one's accused SmartHeat of any misbehavior yet, but many investors must be gnashing their teeth over the company's decision to issue a secondary offering of 5 million shares at just $5 a stub, almost 12% below where the stock had been trading. Yet if the company can continue its powerful growth -- revenue rose 48% in the most recent quarter -- those investors might be willing to forget that dilution.

Before then, however, they might want management to explain the near-150% jump in receivables. A huge surge like that typically warrants some explanation --particularly since receivables already rose 167% the previous quarter -- but SmartHeat says the jump owes primarily to increased sales. Considering that the company's allowances for doubtful payments only rose 84% from the year-ago period, investors might want to tread carefully here.

The CAPS community remains very bullish, though, with 97% of the members who've rated SmartHeat confident that it will outperform the market. Nearly all the All-Stars who've chimed in think similarly highly of the company.

Me, I've rated SmartHeat to underperform. Let us know on the SmartHeat CAPS page (or in the comments section below) how long you think this maker of energy-saving products can allow receivables to outpace sales.

The sun never sets
For a company that's been rated by more than 1,300 CAPS members, Sun Hydraulics has had relatively few people weigh in on why they overwhelmingly think it's going to beat the Street. Yet with the maker of screw-in hydraulic cartridge valves raising its fourth-quarter guidance after profits surged in the third, it seems to be doing fine all on its own.

Sun isn't willing to suggest how the long term will play out just yet, but for the immediate future, it sees growing traction even in segments of the economy that are typically slow to recover from a downturn. That translates into better results and increased sales projections for Sun.

This past summer, when the stock was beaten up, CAPS member BFMall figured it was an opportune time to pick up shares. Add Sun Hydraulics to the Fool's free portfolio tracker, so you can keep track of how the stock rises and sets over time.

The ball's in your court
Many factors 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 investor-analysts on whether you think these stocks are ready to bound higher.