Recs

4

5 Stocks to Pounce On After a Big Correction

For many, yesterday's big drop in the stock market was a scary, ominous sign of what might be to come. But long-term investors who have prudently kept money on the sidelines for the next golden opportunity should be overjoyed at the prospect of a market correction -- because it may give you the attractive entry points you've been looking for.

Investing in a straight-up market
Last month, I noted just how hard it is to invest when the market is soaring. The pressure to do something -- anything -- seems to increase every day that you watch share prices go up.

Yet the best thing you can do in those situations is nothing. Nothing, that is, except to plan for the future -- and, more specifically, the inevitable time in the future when the market finally comes down again. If you have a plan in place, then you'll be better prepared when the time comes to take smart, profitable action.

Making a list, checking it twice
One great way to keep your emotions in check as an investor is to make what may seem like unreasonable demands on stocks you're assessing as candidates. By setting your standards higher, you leave yourself open to never getting the deals you want. But when you occasionally do find a stock that meets your criteria -- and it'll happen from time to time, no matter how ridiculous those criteria may be -- it'll give you the best prospects for profits that you could ever ask for.

Today, let's look at five big-growth candidates whose share prices have soared just a little too high lately. If the market's fall yesterday turns into a full-blown correction, then these stocks might suddenly look a lot more attractive.

priceline.com (Nasdaq: PCLN  )
Priceline has distinguished itself with its customer-bidding process and its unparalleled ability to negotiate from a position of strength with travel providers. But eventually Priceline will have to slow down. That's why despite strong results, paying 30 times earnings seems expensive. I'd rather "name my own price" on the shares at about a 20% discount, corresponding to its 24% long-term future expected growth rate -- and hope that William Shatner can deliver.

Intuitive Surgical (Nasdaq: ISRG  )
Robotic surgery is the wave of the future, and Intuitive Surgical is surfing on its leading edge. But growth for such an expensive item has an inherent speed limit, and paying 30 times forward earnings estimates doesn't match up well with realistic growth projections. Bring that price back down to where shares traded last summer, however -- about 30% lower -- and the company starts looking more attractive again.

Wynn Resorts (Nasdaq: WYNN  )
Unlike Priceline and Intuitive Surgical, Wynn Resorts has already seen a nice move down for its share price. If the company is indeed on the cusp of a deal to develop a new property on the Cotai Strip area of Macau, then its current growth projections could go up in a hurry. But even if future growth is 50% faster than currently expected, a 10% cheaper price would go a long way toward building in some margin of safety.

Silver Wheaton (NYSE: SLW  )
Silver-streamer Silver Wheaton has an enviable business model, with a sweet deal that allows the company to reap the benefits of rising silver prices without the uncertainty and capital demands of actually having to mine for the metal itself. Although this year's run-up in silver prices has made the shares expensive, even returning to beginning-of-2012 levels just under $30 per share would make a much better buying point.

Northern Oil & Gas (AMEX: NOG  )
The Bakken shale play has huge potential, both for profits and for heartbreaking losses. But Northern is unusual in that it doesn't operate its wells, instead hiring outside operators to work its properties. That has helped the company avoid debt, but it's still vulnerable to falling oil prices or bad luck in its drilling. A correction that pulled the shares down another 10% to 15%, however, would potentially take a lot of the risk out of the stock.

Stick to your guns
Of course, there's no guarantee that yesterday's plunge was anything other than a one-day blip. And even if a bigger correction comes, these stocks might not fall enough to make you comfortable with their value proposition.

But patience is the most important virtue as an investor, and by waiting for the perfect opportunity, you'll maximize your chances for good results. Especially in a high-priced market, you need as many things going for you as you can get.

Good retirement planning is all about investing smart. The Motley Fool's latest special report on retirement highlights three promising stock picks for retirement investors, along with useful tips on handling the ups and downs of the financial markets. Don't wait -- get your free report today while it's still available.

Fool contributor Dan Caplinger doesn't really expect such huge corrections on stocks, but you can always hope. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of priceline.com and Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy gets everything correct.


Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

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 March 07, 2012, at 11:16 AM, garypatino wrote:

    I'm not sure why everyone is so excited about Priceline. Isn't this the same company that had "accounting irregularities" about 8 years ago?

    At that time they did not want to report revenue according to normal accounting principles.

    Now what I see is press releases stressing not Priceline's revenue, but the revenue of the hotels and airlines (Priceline's bookings). They also report non GAAP earnings. In a nutshell that means that Priceline is saying "If we don't follow the accounting rules our income is great!"

    One more thing that I noticed yesterday is that they are issuing $875 million of bonds. If they are actually doing so well like they want investors to believe, where is their cash? Why do they need to borrow this money instead? Once a company has "irregularities" in accounting, that part of its corporate culture is usually there to stay. This is only my opinion and I predict that Priceline's stock price is a bubble waitng to burst again!

  • Report this Comment On March 07, 2012, at 12:27 PM, TMFGalagan wrote:

    @garypatino - A number of companies are selling bonds even when they arguably don't need the cash. With rates at very low levels, it's a smart time for companies to raise capital cheaply.

    best,

    dan (TMF Galagan)

  • Report this Comment On March 07, 2012, at 2:43 PM, sikiliza wrote:

    @garypatino - Some of the greatest companies today have stumbled on the way to greatness - Apple for instance even went as far as firing their founder.....

    Very few organizations maintain their "DNA" which is a function of management continuity, succession planning and strategic direction. If you can change these two, you can pretty much change the direction of any company on the planet - I wouldn't go as far as to say that any behavior is there to stay.

  • Report this Comment On March 08, 2012, at 5:44 PM, Revbird5 wrote:

    I have been on the roller coaster of DNDN for some time and was just wondering if it might be a good ride into a way of using our own defenses naturally present in our biology as a gateway to non ivasive cures or if it is more a candidate for an upset stomach with others taking the lead in more dis-eases, cheaper and with greater efficacy. Signed hopefully confused.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1802035, ~/Articles/ArticleHandler.aspx, 10/25/2014 5:47:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 8 hours ago Sponsored by:
DOW 16,805.41 127.51 0.76%
S&P 500 1,964.58 13.76 0.71%
NASD 4,483.72 30.92 0.69%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2014 3:59 PM
ISRG $478.01 Down -7.52 -1.55%
Intuitive Surgical CAPS Rating: ****
NOG $10.73 Down -0.42 -3.77%
Northern Oil and G… CAPS Rating: **
PCLN $1138.43 Up +7.45 +0.66%
Priceline Group CAPS Rating: ***
SLW $19.74 Up +0.03 +0.15%
Silver Wheaton Cor… CAPS Rating: ****
WYNN $184.72 Up +1.23 +0.67%
Wynn Resorts, Limi… CAPS Rating: ***

Advertisement