5 Stocks Springing Back

With all the volatility in the markets today, there's no shortage of market seers attempting to call a bottom. Bernanke called a bottom not once, but twice. Heck, even Keanu Reeves laid out what a world-ending market bottom looks like.

And investors should be buying near the bottom, 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 out. But CAPS has a great balance of both quantitative and qualitative resources available on 5,300 stocks, and even a nifty stock screening tool to help investors quickly zero in on potential investment opportunities. Then we can use all the information in CAPS to test 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 filter out $100-million-plus companies that have seen their stock price appreciate by at least 20% in the past 13 weeks even while they remain at least 50% below their 52-week high. These stocks also have both a positive return on equity and earnings per share over the last 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.

Source: Motley Fool CAPS. Price return from April 24 through July 23.

The bottom case
I see several reasons why U.S. Steel may be looking nowhere but up today. After working at reduced capacity during the downturn, many steelmakers like Steel Dynamics, ArcelorMittal, and U.S. Steel have recently said they are resuming some of their idle capacity. Reduced inventories in the industry and an uptick in demand from emerging markets have helped steel prices recently and set a spring that could snap depending upon where the economy goes from here. U.S. Steel has raised prices several times since June 1, and blue-chip aluminum company Alcoa (NYSE:AA) is also seeing higher aluminum prices since last quarter. The industry-wide production increases recently prompted a Morgan Stanley analyst to upgrade its outlook for U.S. Steel, and the global emphasis on infrastructure projects as the anchor for economic recovery also bodes well for the long-term growth in steel.                                                     

Or dead cat in disguise?
Even though U.S. Steel may look spry, some CAPS investors provide good counterpoints to consider and have noted several reasons to be cautious on the stock today. Even while some members like the long-term outlook, many are skeptical of the sustainability of the recent recovery and prospects for continued growth in the short term. Outlooks from industry executives are far from unanimous, with mixed views coming from major companies like Nucor and South Korean steel giant POSCO. Large steel consumers such as Boeing (NYSE:BA) have scaled back operations, and the auto industry's recovery is coming at a slow pace, leaving the near-term picture for demand a little cloudy. And the company now has the distraction of dealing with a Canadian lawsuit over production at its Stelco subsidiary.

What's your call?
Overall, 93% of the 1,990 CAPS members rating U.S. Steel are bullish and see it outperforming the broader market. For my part, the fact that some very large and successful steel makers are currently hedging outweighs the positive signals. But 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 even add your own insight on any of the 5,300 stocks that our 135,000-plus members have covered -- whether it's related to expired felines or not.