5 Stocks Bouncing Back

However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

Among the more than 460 stocks listed under health care in the CAPS' screener, we've unearthed more than a few with perfect five-star ratings. That means our 140,000-member CAPS community is confident that these stocks will beat the market in the months ahead. Let's see what members are saying about the five below:

Sources: Motley Fool CAPS; Yahoo! Finance.

Some companies in the health-care sector have fared better than others -- Keryx Biopharmaceuticals (NASDAQ:KERX) has risen more than 800% year to date, after all, and MannKind (NASDAQ:MNKD) has just about doubled -- but even the average health-care stock is in the pink of health with returns of more than 53% from the year-ago period. So let's take a closer look at why investors might think that some of these companies won't be jumping from the frying pan into the fire.

Some spring in its step
Speaking of jumping into the fire, American Oriental Bioengineering can't stay away from the heat these days. It wasn't that long ago that the purveyor of traditional Chinese medicine was called on to explain why it was buying expensive corporate conference center real estate for no apparent good reason, and later it was revealed that the deal involved related-party transactions that hadn't been publicly disclosed. But we'll pass on the consternation caused by some questionable preferred stock offerings and head-scratching acquisitions made the year before.

After the two most recent public relations snafus, you'd think American Oriental Bioengineering's leaders would make sure that they had all their i's dotted and t's crossed. You'd think that, but you'd be wrong.

There may be a possibility that the money reportedly paid by American Oriental Bioengineering doesn't add up with the cash received by the director's company, and it also calls into question just how independent he can actually be. Equally disturbing is a separate competing business set up by AOB's CEO that subsequently acquired the director's company.

There seems to be a little too much opaqueness in the communications and transactions of American Oriental Bioengineering for my tastes. While the company has remained an active recommendation of both Motley Fool Hidden Gems and Global Gains during these episodes because of its huge growth potential, even the advisors' confidence in this company has been sorely tested.

Yet the company remains an investor favorite. Of the more than 3,100 CAPS members who have rated its stock, fully 97% have indicated they believe it will outperform the market. No doubt a lot of that is based on market opportunity, as All-Star mrindependent suggests:

the Chinese government is making a substantial push to expand the country's health care sector. American Oriental [Bioengineering] ought to benefit from this initiative. The price is right at 1.04 times book value and 6 times estimated earnings in 2010 (i.e. $0.77 per share). The balance sheet is good and historical sales growth is phenomenal.

Similarly, while acknowledging the risks associated with the recent incidents, Cicciano thinks it comes down to much ado about nothing:

This company has a stranglehold on many of the most popular herbal medicines in China. A Billion repeat customers, anyone? The recent negative publicity involving its shady government land deals appears to be overblown or at least the cost of doing business in China doesn't seem to have deeper implications for the management of the company, although I do expect a greater degree of forthrightness about company dealings in the future.

If the company wants to bounce back, however, it's going to need to improve its communications policy. Maybe business is done a certain way in China, but since it has sought out Western dollars to finance its growth -- growth that's been falling a little flat lately -- it needs to do more than just pay lip service to continue to attract capital.

The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.