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5 Superball Stocks

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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:


How Far From 52-Week High?

Recent Price

CAPS Rating (out of 5)

Terra Nitrogen (NYSE: TNH  )




Mesabi Trust (NYSE: MSB  )








Heckmann (NASDAQOTH: NESC  )




Dynavax Technologies (NASDAQ: DVAX  )




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

Five super falls -- one superball
Week Three of 2013 saw stock markets rise a respectable 1% -- which was good news, unless you happened to own one of the 2,200-odd stocks that did the opposite of going up. Stocks like the five named above. But what kept them from enjoying a portion of the riches?

In the case of Dynavax, it seems likely the company merely drifted down off the big bounce it received the preceding week. As you may recall, Dynavax shares surged last week on positive commentary out of the J.P. Morgan Healthcare Conference. But what the markets giveth, the markets can also taketh away -- often with little reason in either case. After rising 15% two weeks ago, Dynavax gave 7% back last week, leaving shareholders still ahead of the game.

Similarly, no bad news was in evidence at Heckmann -- a stock I've been warming to lately -- to explain the stock's decline last week. Seems to me the drop there, combined with an improvement in free cash flow, may offer a buying opportunity in disguise.

In the case of Atmel, however, there may be more to the stock's 5% sell-off. On Tuesday, Atmel blamed "weak economic conditions" for its decision to lay off 15% of its workforce. That bodes ill for the company's upcoming Feb. 6 earnings report. Seems some investors are heading for the exits early.

Likewise, bad news lay behind the decline at Mesabi Trust, which warned Tuesday that its upcoming "distribution" (essentially, a cash dividend) for February would be only $0.49 per "unit," a steep drop from the $0.76 payout for the same period a year ago. Low iron ore prices in Q4 were blamed.

As you may have noticed, all of these stocks get pretty good ratings from CAPS investors. The worst of the bunch, unprofitable Dynavax, still gets an ambivalent three-star rating. Everyone else, meanwhile, scores a downright optimistic four CAPS stars. But there's one of the five I like more than all the rest combined, and that's why today, we'll be examining ...

The bull case for Terra Nitrogen
Four-star-rated Terra Nitrogen has a lot of fans on CAPS, not the least of which is CAPS superstar stockpicker chk999, who with remarkable understatement calls Terra's 6.8% distribution rate "nice."

CAPS member CB0606 predicts boom times for Terra in 2013: "[T]he terrible drought last summer really has driven down supplies of corn and soybeans making the prices go up significantly. The need to fertilize in the spring will likely drive this stock above S&P averages."

And as All-Star investor fooluser17 points out, Terra is a veritable "cash machine" of a business.

It's easy to see why fooluser17 would think so, because ... she's right! With $530 million in positive free cash flow generated over the past year, Terra Nitrogen actually generates about $1.72 in cash profits for every $1 it's allowed to report as GAAP "earnings." So while on the surface, the stock's 14.1 P/E ratio may not seem cheap, Terra's 8.2 price-to-free cash flow ratio proves that it really, truly is.

Add in the fact that cash-rich Terra boasts a balance sheet plump with $160 million cash and no debt to speak of, is growing at 11%, and -- as chk999 noted -- pays a "nice" 6.8% yield, and I think the stock's a no-brainer.

Foolish takeaway
Four starts for Terra Nitrogen? Pshaw. If any stock deserves a full five-star rating, this is the one. It's a definite candidate for superball status.

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Related Tickers

9/23/2016 4:02 PM
TNH $112.09 Down -0.99 -0.88%
Terra Nitrogen CAPS Rating: ****
ATML.DL $0.00 Down +0.00 +0.00%
Atmel CAPS Rating: ***
DVAX $11.41 Down -0.21 -1.81%
Dynavax Technologi… CAPS Rating: ***
MSB $9.36 Down -0.09 -0.95%
Mesabi Trust CAPS Rating: **
NESC $0.21 Down +0.00 +0.00%
Nuverra Environmen… CAPS Rating: ***