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)

MV Oil Trust (NYSE: MVO  )

37%

$26.18

*****

Sarepta Therapeutics (NASDAQ: SRPT  )

42%

$26.18

**

MGIC Investment (NYSE: MTG  )

44%

$2.91

**

MBIA (NYSE: MBI  )

38%

$8.26

**

Molycorp (NYSE: MCP  )

76%

$8.48

*

Companies are selected by screening on finviz.com for abrupt 5% or greater price drops last week. Recent price and 52-week-high data provided by finviz.com. CAPS ratings from Motley Fool CAPS.

Five super falls -- one superball
Week Two of 2013 saw stock markets notch a modest 0.4% gain -- which was good news, unless you happened to own one of the 2,641 stocks that saw no gain at all. If you happened to own, for example, one of the five stocks named in our table. What kept them from sharing in the glory? Funny you should ask.

Beginning at the bottom, rare-earth miner Molycorp got blasted Thursday, when new (interim) CEO Constantine Karayannopoulos was forced to admit that 2013 revenue is going to come in much lighter than previously hoped. Phase 1 production from the company's Mountain Pass mine won't begin for six months. Meanwhile, the company's going to keep burning cash as it tries to bring production on line.

Meawhile, MBIA is suffering from a note that came out Monday, in which analyst MKM Partners suggested Bank of America (NYSE: BAC  ) will not soon settle claims MBIA has filed alleging misrepresentations on mortgage-backed securities it insured. In possibly related news, private mortgage insurer MGIC (also involved in litigation  with B of A) took a hit Tuesday, after reporting its monthly operating statistics for December -- even though this report showed a decline in delinquencies. Shares of both MBIA and MGIC were down significantly last week.

And of course, muscular dystrophy drugmaker Sarepta lost 10% of its market cap last week on no bad news at all. (To the contrary, one Fool sees some potential good news and points out that Sarepta shareholders might soon enjoy a buyout premium.)

That pretty much wraps up the below-average one- and two-starred CAPS ratings for the week. But what about the one stock on this week's list that investors actually like? What about ...

The bull case for MV Oil Trust
Speaking of stocks that are down on no bad news at all, MV Oil Trust dropped a bit last week. In contrast to the other stocks I've named, though, a lot of CAPS members seem to think that this decline is actually a buying opportunity.

DavidOfDukeLow introduced us to MV Oil last year as a "royalty trust [that] generates income by selling oil and natural gas produced by MV Partners LLC, an exploration and production firm operating in Kansas and Colorado." This CAPS member adds: "MV Oil Trust's payout ratio is currently 100%, good for a dividend of $3.07 a share and a yield" of 10%.

Egalvin calls the stock a bargain, and he's not the only one to think so. CAPS member OREKEV argues that "oil is ... going to be the primary fuel for another 50 years." As such, MV's claim on the net profits of MV Partners should keep on generating generous dividend payments for years to come.

Speaking of which, there are really two good reasons to like this company. The first, obviously, is the yield: 10% is quite a big dividend yield, and about four times the size of the average dividend paid in the S&P 500 .

Second is the price: MV Oil currently costs only seven times annual profits, and these profits are (in the opinion of Wall Street analysts) likely to grow at about 7% per year over the next five years. This suggests at worst a fair valuation on the shares. And once you factor the rich dividend yield into the picture, MV Oil looks quite cheap indeed.

Cheap enough to give investors a superball bounce after last week's selloff? Maybe. To be honest, I don't see any reason why not.

To learn more about the most talked about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


Read/Post Comments (2) | Recommend This Article (8)

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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 January 14, 2013, at 8:10 PM, emberny32 wrote:

    I wonder how many buyers of MV Oil Trust (MVO) understand that when the trust ends in 2026 the value of the stock becomes -0-

    The dividends are dependant on the price of oil and of course will fluctuate. So...you get a nice dividend, hopefully as oil goes up ??? if oil gets more plentiful here in the US...maybe down??? Anyhow... in 2026 no more divs and no more stock. I bought it,...when I realized the trust thing I sold at a loss. Now it seems to have had a bounce up so not only was my due diligence inadequate but my timing also.

    I am not short the stock nor have any options on it. Good luck ....emberny

  • Report this Comment On February 08, 2013, at 11:15 AM, fasfas123 wrote:

    MVO trust is over in 2026 or when they run out of oil in the 1000 wells; whichever comes later. At recent filing, there is estimated to be about 50 years worth of oil left. Looks like you need to redo your research at least twice before taking action.

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