Get Ready for the Bounce

"Don't catch a falling knife," as the old saw commands. (Pardon my mixing a cutlery metaphor.) The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade. That's where Motley Fool CAPS comes in.

It's been awhile, but thanks to last week's sell-off, we once again have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders:

Companies selected from the list of stocks hitting new intraday 52-week lows as reported on finviz.com. Recent price and 52-week high provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

The week in weak stocks
Markets ended their second week of declines in a row on Friday, as the S&P 500 slipped to 1,370. The good news is that the S&P remains in positive territory for the year to date. The bad news is that not all stocks are so lucky.

Natural gas prices that hit their lowest rates in a decade last week ($1.98 per 1,000 cubic feet) are devastating the share prices of anyone and everyone involved in the nat-gas industry. Ultra and Hugoton, Chesapeake and Southwestern Energy, and of course the U.S. Natural Gas ETF -- each is hobbling around at 52-week lows. And yet, while investors remain (justifiably) skeptical of the ETF that's come to exemplify the nat-gas industry's problems, they remain stubbornly optimistic about the prospects for companies that actually suck the stuff out of the ground, awarding four- and five-star ratings to each of the major players.

Why? CAPS member shadestrades is convinced that what goes down must come up eventually, and while awaiting a "Natty Gas rebound" is content to reap Hugoton's "6+% royalty payment."

countylongford is counting on a growing "[infrastructure] for natual gas fueling stations" to fuel the rebound, and thinks Chesapeake Energy is well placed to benefit from it.

Meanwhile, redt3x is looking further abroad, counting on "demand for traditional oil and gas [to] only rise as more countries are developing. "

The bull case for Ultra Petroleum
Drilling down to find a buy thesis on a particular stock, though, I think CAPS member GirlsUnder30 has the strongest argument, predicting that Ultra Petroleum's "great extraction technology [and] competent managers" will help it to capitalize upon "a depressed commodity that has to improve in either market share or price" faster than anyone else in the industry.

Since we last talked about Ultra Petroleum in this column (in February), the stock has basically tracked the downward trajectory of gas -- gas prices down 20%, Ultra's share price likewise. But the fact still remains: Across the nat-gas industry, you'll be hard-pressed to find a company with a lower cost of production than Ultra's.

At roughly $2.61 per million cubic feet equivalent, the company was close to breakeven at the prices nat gas fetched two months ago. Today, it's operating at a loss -- but still closer to breakeven than anybody else in the nat-gas game. (Chesapeake Energy, for example, needs gas to more than triple in price before it can make a profit on the stuff, and even Southwestern Energy requires close to a double.)

Foolish takeaway
Tough times continue in the natural gas industry, and they may stay tough for quite some time. If you're looking for a company that will bounce back before the others, though -- and maybe bounce back hard if our CAPS members' predictions for rising domestic and international demand prove out -- then Ultra Petroleum looks like the best bet out there.

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