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 beaten good companies down to great prices. That's why we here at the Fool -- and more than 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 if it 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 changes from May 22 through August 19.

The bottom case
I see several reasons why Massey Energy may be seeing more up than down in the coming days. In the second quarter, Massey defied expectations when it picked up market share and increased coal shipments to utilities despite a weak coal market overall. With Consol Energy (NYSE:CNX) recently striking a coal deal with China, Massey itself has begun to rehire miners in anticipation of growing demand for U.S. coal from both European and Asian steelmakers. Massey also sees opportunity to sell directly into Indian and Chinese markets, and it expects its coking coal shipments to account for about half its exports in the second half of this year. And with U.S. steel producers like Nucor and AK Steel Holding (NYSE:AKS) showing signs of stabilization, and steel mills in the U.S. reopening capacity in recent months, the future's looking brighter for Massey.

Or dead cat in disguise?
Even though there are many positive signs showing for Massey Energy, its second-quarter results are still just less bad than what many were expecting. Operating margins contracted during the quarter and, like Peabody Energy (NYSE:BTU), Massey's net profit took a big drop from last year, after backing out a one-time legal settlement charge last year. Coal-consuming utilities like Duke Energy (NYSE:DUK) and American Electric Power see weaker electricity demand this year, and Massey expects the utility side to be ugly for the next 18 months -- not a comment that instills much confidence with investors. Some CAPS members also point out that Massey faces increasing scrutiny involved with mountaintop mining and intense competition in the export market, so there is no shortage of issues facing the company.

What's your call?
Overall, 93% of the 676 CAPS members rating Massey Energy are bullish and see it outperforming the broader market. For my part, Chinese and Indian demand may be just peachy, but I'm reluctant to embrace coal as long as the domestic market remains weak.

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.