With all the volatility in the markets today, there's no shortage of seers attempting to call a bottom. Fed Chairman Ben Bernanke called a bottom not once, but twice. Heck, even excellent actor Keanu Reeves laid out what a world-ending market bottom looks like.
And investors should be buying near the bottom, especially when pessimism has unduly beat good companies down to great prices. That's why we here at the Fool -- and 135,000 investors like us -- look to the Motley Fool CAPS community to help sniff out the real opportunities from languishing companies driven by speculation.
Real bottom or another leg down?
Of course, there's no foolproof method of knowing whether any stock, or even the general market, has bottomed. But CAPS has a great balance of both quantitative and qualitative resources, and even a nifty stock screening tool to not only identify opportunities but also determine whether an individual company has already seen its bottom valuation, or has just primed shareholders for further pain.
I've used the CAPS screener to find $100 million-plus companies whose stocks have appreciated by at least 20% in the past 13 weeks, even while remaining at least 50% below 52-week highs. These stocks also have both a positive return on equity and earnings per share over the past 12 months; this limits the results to companies that have a history of delivering results regardless of stock gyrations. If you'd like, run this screen yourself -- just keep in mind that results may change as the market does.
|
Company
|
CAPS Rating
(out of 5)
|
13-Week
Price Change
|
% Below
52-Week High
|
|
China Natural Gas
|
*****
|
55.8%
|
50.7%
|
|
Kansas City Southern
|
*****
|
29.9%
|
64.2%
|
|
Walter Industries (NYSE: WLT )
|
****
|
82.7%
|
57.1%
|
|
Suntech Power Holdings (NYSE: STP )
|
****
|
32.0%
|
60.4%
|
|
LDK Solar (NYSE: LDK )
|
***
|
37.7%
|
78.4%
|
Source: Motley Fool CAPS. Price return from May 1 through July 28.
The bottom case
A whole slew of CAPS members see brighter days ahead for Suntech Power and solar companies in general. The Chinese government recently announced its long-awaited subsidy for large solar power projects, which should benefit Suntech and other Chinese solar companies.
The country has been making a big push to go green and has a target of 10 gigawatts of solar power by 2020. Suntech, the country's largest solar company, recently demonstrated its presence when it announced deals to develop four projects totaling 1.8 gigawatts of power. Peer ReneSola (NYSE: SOL ) announced a couple of preliminary agreements for two projects with Chinese municipalities.
Many investors believe that China will eventually become a major solar market and anticipate that Chinese companies will have an edge over U.S. players like First Solar (Nasdaq: FSLR ) in the Chinese market.
Or dead cat in disguise?
Even though Suntech's future looks bright, shares in solar companies like Suntech, Trina Solar (NYSE: TSL ) , and Yingli Green Energy (NYSE: YGE ) have soared in recent months, and Suntech's shares now hold high expectations as it sits at an earnings multiple north of 70 and a forward P/E of 45.
Prices for solar panels have continued to face pressure due to weak global demand, and some CAPS members are concerned about the company's debt, which, at nearly $1.5 billion, matches its current assets and outweighs its total equity. As earnings season rolls around, some CAPS members believe too many risks are present to support the current price, including the potential for more dilutive share offerings to manage debt and rosy expectations of an aggressive recovery.
What's your call?
Overall, nearly 97% of the 4,495 CAPS members rating Suntech Power are bullish and see it outperforming the broader market. For my part, I'm hesitant to jump at a pricey stock in this market, regardless of the prospects. But that's just me.
What ultimately counts is your own opinion; CAPS is just there to help you form it. The best part is that the Motley Fool CAPS database is all free, and you can add your own insight on any of the 5,300 stocks that our 135,000-plus members have covered -- whether they're related to expired felines or not. (Check out our Flossary to get the scoop on dead-cat bounces.)
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