All in all, there were plenty of Wall Street winners in 2010. But there were also plenty of disappointments, with a number of companies ending the year in the red. These downtrodden stocks may not have looked so hot a few months ago -- but don't be so quick to count them out.
Time after time, companies have risen from the ashes to stage dramatic rebounds. Just look at footwear maker Steve Madden: It bounced back from a securities fraud scandal to see profits increase by over 20% in each of the past nine quarters.
Or automaker General Motors, pulling a complete 180 from where it was circa 2009 bailout. Investors who bought these stocks cheap were able to reap tremendous rewards.
The profit potential in an underdog is great -- but only if it is attractively priced.
If you're interested in rebound ideas, the following list might interest you. To compile this list, we started with a group of rebounding companies. All of the stocks mentioned below lagged the S&P 500 in 2010, but they've all outperformed the benchmark index in 2011.
To refine the list, we looked at valuation ratios, and identified the rebounding stocks trading at the most attractive valuations.
Do you think these attractively priced, rebounding stocks should be on your watchlist? Do your own research, and use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. Stein Mart (Nasdaq: SMRT ) : The stock price declined from $10.66 to $9.25 during 2010, a price return of -13.23%. Contrast this to 2011, with the stock gaining 15.03% year to date. Trailing 12 month (TTM) price/earnings ratio at 9.72 vs. industry average at 17.62. Price to earnings growth ratio at 0.65 vs. industry average at 1.2. TTM price / cashflow at 7 vs. industry average at 11.82.
2. Orthofix International (Nasdaq: OFIX ) : The stock price declined from $30.93 to $29 during 2010, a price return of -6.24%. Contrast this to 2011, with the stock gaining 14.55% year to date. Trailing 12 month (TTM) price/earnings ratio at 13.32 vs. industry average at 21.13. Price to earnings growth ratio at 0.73 vs. industry average at 1.46. TTM price / cashflow at 8.73 vs. industry average at 11.07.
3. Artio Global Investors (NYSE: ART ) : The stock price declined from $25.49 to $14.75 during 2010, a price return of -42.13%. Contrast this to 2011, with the stock gaining 11.98% year to date. Trailing 12 month (TTM) price/earnings ratio at 10.23 vs. industry average at 15.42. Price to earnings growth ratio at 0.79 vs. industry average at 1.17. TTM price / cashflow at 11.2 vs. industry average at 12.18.
4. SMART Modular Technologies (Nasdaq: SMOD ) : The stock price declined from $6.29 to $5.76 during 2010, a price return of -8.43%. Contrast this to 2011, with the stock gaining 39.24% year to date. Trailing 12 month (TTM) price/earnings ratio at 13.08 vs. industry average at 27.64. Price to earnings growth ratio at 0.87 vs. industry average at 1.18. TTM price / cashflow at 8.24 vs. industry average at 10.28.
5. Diamond Offshore Drilling (NYSE: DO ) : The stock price declined from $98.42 to $66.87 during 2010, a price return of -32.06%. Contrast this to 2011, with the stock gaining 13.52% year to date. Trailing 12 month (TTM) price/earnings ratio at 10.89 vs. industry average at 23.66. Price to earnings growth ratio at 0.89 vs. industry average at 1.18. TTM price / cashflow at 7.71 vs. industry average at 13.61.
6. CBIZ (NYSE: CBZ ) : The stock price declined from $7.7 to $6.24 during 2010, a price return of -18.96%. Contrast this to 2011, with the stock gaining 15.06% year to date. Trailing 12 month (TTM) price/earnings ratio at 15.71 vs. industry average at 24.98. Price to earnings growth ratio at 0.98 vs. industry average at 1.88. TTM price / cashflow at 8.19 vs. industry average at 8.79.
7. Kongzhong (Nasdaq: KONG ) : The stock price declined from $12.39 to $7.09 during 2010, a price return of -42.78%. Contrast this to 2011, with the stock gaining 52.05% year to date. Trailing 12 month (TTM) price/earnings ratio at 31.9 vs. industry average at 34.72. Price to earnings growth ratio at 1 vs. industry average at 1.89. TTM price / cashflow at 18.08 vs. industry average at 18.13.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen does not own shares of any companies mentioned.
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