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Catch a Correcting Commodity

Toby Shute
August 5, 2008

Monday delivered yet another gut check for believers in the commodities super-cycle. Even though I've been expecting prices to crack, I still found myself staring slack-jawed at the broad-based and brutal share price declines. The Energy Select Sector SPDR fell more than4.5%, while the SPDR S&P Metals & Mining ETF was slugged for over a 7% loss. Individual names naturally felt even more pain.

That brings me to today's list -- a selection of stocks that, in the course of Monday's turbulent trading, got seriously slammed. It's possible that some of these names were overheated, but I think we may be able to sniff out some value here as well.


Yesterday's Nosedive

Bucyrus International


Petrohawk Energy (NYSE: HK  )


Excel Maritime (NYSE: EXM  )


Freeport-McMoRan (NYSE: FCX  )


Helmerich & Payne


Arch Coal (NYSE: ACI  )


PotashCorp (NYSE: POT  )


Scary in the coalmine
Just recently, my Foolish colleague Chris Barker was praising both Bucyrus' strong margins and its rising backlog. Those numbers haven't changed. What has changed, though, is that this company's oasis-like appearance in the midst of a stormy market has proven something of a mirage. But that just has to do with market prices. If you suspect, as I do, that Bucyrus' business value hasn't suddenly deteriorated, then you may want to think about digging into shares of this coal excavation expert.

Then there's Arch Coal, which may not sport the best margins among coal miners, but may yet merit Foolish attention. Thanks to hiccups in South Africa and Australia, Arch's CEO has predicted a mounting supply deficit through the end of 2009. Metallurgical coal suppliers in particular are becoming takeover bait. Arch, meanwhile, is the second-largest coal producer in the country, and may be worth a second look.

Speaking of takeovers
Of all the companies on this list, the one looking most ripe for a buyout is Freeport-McMoRan. Sure, the firm's more behemoth than bite-sized, but there are even bigger metal magnates on the prowl. Fellow Fool David Lee Smith has tipped a certain Brazilian outfit as the most likely buyer, and I don't disagree. Not only is Freeport's copper cache compelling, it's also the biggest molybdenum producer in existence.

Whether or not