These three companies just didn't live up to Mr. Market's expectations last week. Sometimes an earnings stumble is a signal to sell, but digging in the dirt is also a good way to find turnaround candidates while they're getting beaten down.
Today, we're looking at one five-star stock and two Foolish newsletter picks that failed to impress the Street last week. What's up?
Tough as nails
First up is Commercial Metals
Fellow Fool Toby Shute said that these results really are stronger than they seem at first glance, as unusual accounting rules hide the tremendous benefits of rising scrap metal prices. Mr. Market saw through the smoke: Commercial Metals' stock is up more than 5% over the past week, even as the broader S&P 500 lost 3%.
As long as the global construction boom continues -- and in spite of the domestic housing weakness -- it seems that metals specialists like Commercial, Gerdau Ameristeel
Motley Fool Stock Advisor recommendation FedEx
An $891 million writedown, mostly related to goodwill, pushed FedEx down to a $241 million net loss, so you could blame the entire debacle on the Kinko's acquisition of 2003. That's right -- ill-advised deals can come back and bite a company five years later.
Rising fuel prices and weakening consumer confidence don't help, either. While the Kinko's problem is uniquely FedExian, fellow shippers like United Parcel Service
FedEx remains a well-managed business with a massive market footprint and some unique growth opportunities here and abroad. Now, you can buy into all of that at a forward P/E ratio of just 12.9. The little value investor in me has started to salivate ...
Finally, we're casting a glance at used-car retailer CarMax
Unsold inventory is becoming less and less valuable every day, and CarMax wrote down its trucks and SUVs by a staggering 25% in these three months alone. Time for a Toyota
As for CarMax, the company is not ready to change its strategy or business direction, and prefers to wait for better times "when there is a more stable outlook for the economy and we have better visibility on trends." Oh dear. I'd hold off on buying stocks under management that refuses to take proactive action when there is a clear need to make changes. It's a brave new world -- wake up to it.
Some of these underperformers are victims of larger circumstances, while others might have only themselves to blame. It's up to you to decide which down-on-their-luck companies should be able to pull themselves up by the bootstraps, and which ones are stuck in the mud for real.