5 Superball Stocks

In my recurring Fool column, "Get Ready for the Bounce," we search for future winners in a pile of 52-week losers. But do we really need to sit around for a whole year, waiting for a fallen stock to bounce back?

Nope. Sometimes stocks fall hard, in far less time than a year. And like a superball dropped from the balcony, the harder they fall, the higher they bounce. Today, we'll look at a few equities that have suffered dramatic drops over the past week. With a little help from the 165,000 members of Motley Fool CAPS, we hope to find an opportunity or two for you:

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

Five super falls -- one superball
If you had money invested in the stock market last week, chances are, you have less of it today. Rare indeed was the stock that didn't lose value, as nearly 500 brand-name equities dropped 10% or more over the course of the week.

What went wrong? At the risk of oversimplifying, investors seem to have realized the world is a risky place. Between a lousy June jobs report and fears of slowing growth, they sold off stocks in general last week, and commodities stocks in particular -- hence the five names up above.

But aside from general investor jitters, there really wasn't a whole lot in the way of bad news for any of these companies. In fact, the only real news I can find on any of them was that of Alcoa's purchase of a little window and door maker named Traco -- not a big enough deal to drive Alcoa down 10%, and no reason at all to sell any of these other companies. Perhaps that's why, even as the rest of the world is selling them, CAPS members remain optimistic about all five companies on today's list ... and about Chesapeake Energy in particular.

The bull case for Chesapeake Energy
Regular Fool readers are already more than familiar with this energy large cap. Fact is, we've been singing Chesapeake's praises for over three years now -- and not just us. CAPS member Boom603 is convinced that natural gas "is sure to be the fuel of the future." Fellow investor BiggDude points out that Chesapeake is the "Biggest Nat Gas producer in America."

Why might gas be the fuel of the future? davfoo explains: "Coal is too dirty. Oil is imported and too expensive. If T. Boone Pickens, is correct, then the Energy mix in the near term is going to shift to windpower for electric and domestic [natural gas] for electric and vehicles. The big slow down up for the change over is mainly political and not economic. when that happens, [natural gas] prices will go up."

... and Chesapeake will be there to profit from it.

Digging for value
Granted, at 26 times earnings Chesapeake may not look like much of a bargain today, but consider what tomorrow might look like. In particular, check out the company's sub-7 forward price-to-earnings ratio, which values Chesapeake on what it's expected to earn by year-end 2010.

For that matter, take another look at the valuation today. For while the company's P/E may not look attractive, if you view Chesapeake as a play on its assets, the picture shifts substantially. Consider: With 14.25 trillion "cubic feet equivalent" of proven natural gas reserves on its balance sheet -- gas currently priced at $4.71 per million British thermal units in energy value -- Chesapeake's in-the-ground assets are worth $69.1 billion. Yet investors today are valuing Chesapeake's enterprise at a mere $25.6 billion, a 63% discount to its asset value.

By way of comparison, other major gas players such as ConocoPhillips (NYSE: COP) and ExxonMobil (NYSE: XOM) sell for less and more (respectively), relative to their asset value. Conoco, with roughly 62.0 trillion cfe in proven reserves, possesses assets worth $378.6 billion and sells for an enterprise value of $106.9 billion (a 72% discount). Exxon's 137.9 trillion cfe should be worth $669 billion, but the enterprise value there is discounted by 57%.

Time to chime in
Granted, the comparisons here are not perfect. Both Conoco and Exxon possess reserves heavily weighted toward higher-priced oil, as opposed to Chesapeake's gas-heavy balance sheet. But if you think about it, this could actually work to Chesapeake's benefit. If you agree with our CAPS members, if you agree with T. Boone Pickens, and if you agree with me that natural gas prices are bound to rise, that makes for one fine bull argument in favor of buying Chesapeake today.

Not that you have to agree with any of us. In fact, in the wake of the BP disaster, maybe you're of the opinion that the whole concept of drilling for our energy is an enterprise fated to "go the way of the dinosaurs" (so to speak).

Whatever your opinion, though we'd love to hear it. Click over to Motley Fool CAPS now, and tell us what you think.