5 Superball Stocks

When stocks fall fast and far, they sometimes set themselves up for remarkable rebounds. The following equities suffered dramatic drops over the past week. With help from the 180,000 members of Motley Fool CAPS, we'll see whether any of them have the potential to bounce back.

It's been a while, 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

 

How far from 52-week high?

Recent Price

CAPS Rating (out of 5)

MAKO Surgical (UNKNOWN: MAKO.DL  )

(73%)

$12.09

*****

DryShips (NASDAQ: DRYS  )

(59%)

$1.58

***

VirnetX Holding (NYSEMKT: VHC  )

(30%)

$29.36

*

Herbalife (NYSE: HLF  )

(59%)

$29.39

*

Star Scientific (NASDAQ: STSI  )

(48%)

$2.65

*

Companies are selected by screening on finviz.com for abrupt 10% or greater price drops last week. 52-week high and recent price data provided by finviz.com. CAPS ratings from Motley Fool CAPS.

Five super falls -- one superball
With the S&P 500 down a full 2% in last week's trading, you might expect that quite a few stocks got hurt pretty bad -- and you'd be right. In fact, nearly 5,000 separate companies exited the abbreviated week lower than they entered it.

Some stocks are doing even worse. The five named up above for example, have all been literally decimated, losing 10% (or more) of their market cap over the past five trading days. So what went wrong?

Well, beginning at the bottom, Star Scientific has been sliding ever since it announced, a couple weeks back, that it was getting out of the smokeless tobacco business and focusing instead on hawking dietary supplements. The wisdom of that move got thrown further into question when supplements tsar Herbalife got tossed in the trash a few days ago, on news that hedge fund star Bill Ackman has gone heavily short Herbalife stock.

Not all bear cases were as clear cut, however. For example, VirnetX is down 11% since last Thursday despite apparently making progress in its virtual private network-patent lawsuits against Apple (NASDAQ: AAPL  ) . DryShips dropped 10% over a similar time frame... apparently for no good reason whatsoever (unless you count the fiscal cliff as a reason).

And speaking of sinking ships...
Of course, that still leaves the top stock on today's list to discuss: five-star-rated medical robot maker MAKO Surgical. Like VirnetX and DryShips, MAKO has had no bad news to report of late. Like VirnetX and DryShips, however, it's sinking like a stone regardless. But should it be?

After all, CAPS member bcellars argues that after having been "beaten down" hard, MAKO now has "lots of potential upside."

Fool staffer TMFHumbleServant says the company continues "to make progress in attracting larger hospital systems to become customers."

And SophicF00L points out that "the number of robotic arms sold increased this quarter (15 sold 3Q 2012) and it's just beginning to get traction in the medical community. Once these 'razors' are sold, the 'blades' will follow and ... there is the possibility of the use of the robotic arm to be expanded to include shoulders ..."

That hardly sounds like bad news or reason to sell the stock. And yet, the fact remains that MAKO is a company still in search of a profitable business. It's lost money every year it's been publish, and continues to burn cash at an alarming rate.

Over the past 12 months, MAKO's burned through more than $44 million. If it keeps going at this pace, MAKO will burn through its $28 million bank account in less than eight months -- and need to either borrow cash, or dilute its shareholders, to keep the doors open and stay in business.

Foolish takeaway
All in all, I have to say that the prospects for MAKO don't look good at this point. The stock's selling for less than half the price it started at for the year -- but it's still not cheap enough to justify a buy.

The recent market sell-off of MAKO Surgical shares has many wondering whether the potential growth prospects of the robotic surgery company make this stock a buy or a stock to stay away from. To answer this question, Fool.com analyst and MAKO expert David Meier has authored a premium research report covering all of the must-know details on the company, including key areas to watch and risks looming in the future. As an added bonus, David will keep you informed with a full year of updates and guidance on MAKO Surgical as news breaks. Click here now to learn more and start reading.


Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2012, at 10:36 AM, Dawgpac wrote:

    MAKO is fine cash wise. You neglected to note that they raised an additional $43M in a stock offering that closed in December and also have a $50M Line of Credit through Deerfield Management. Look for MAKO to be your Superball stock of 2013.

  • Report this Comment On January 02, 2013, at 12:03 AM, haysdb wrote:

    Question for the author: is what Dawgpac wrote true? If it is, why did you omit it?

  • Report this Comment On January 02, 2013, at 12:56 AM, huibs wrote:

    ..I would suspect the author will correct this error, as MAKO just went through a secondary offering raising 43 million as Dawgpac points out..

    ..we'll see..

  • Report this Comment On January 03, 2013, at 1:16 PM, imacg5 wrote:

    ""DryShips dropped 10% over a similar time frame... apparently for no good reason whatsoever"""

    Do you guys ever do research?

    Cape rates dropped 25% in one day, Dec 13.

    Followed the next day by dropping again, along with a 10% drop in Panamax rates.

    And it's been downhill for rates ever since.

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