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 820 stocks listed under "Services" in the CAPS' screener, we've unearthed more than a few with five-star ratings. Those accolades mean 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:

Sources: Motley Fool CAPS; Yahoo! Finance.

While some companies in the services sector have obviously fared better than others -- Stein Mart jumped 511%, after all, and Cheesecake Factory (NASDAQ:CAKE) more than doubled -- the average services stock is doing well, with returns of more than 65% from the year-ago period. So let's take a closer look at why investors think Paragon Shipping won't be jumping from the frying pan into the fire.

Some spring in its step
Will the Baltic Dry Index rise nearly 82% by year's end, as one analyst predicts, based on fundamentals or as part of a self-fulfilling prophecy?

An analyst at China Ocean Shipping Group predicts that the index, which measures commodity shipping costs, will finish 2009 around the 4,000 level as expected surging demand from China causes an inexorable rise in rates. "If you believe in a China story," the analyst said, "believe in a recovery in the shipping market."

An index that high would put it near its June peak. Rates had plummeted more than 90% last year, but have been clawing their way north as China has been working its way through its announced stimulus plan of more than $500 billion. Asian Development Bank forecasts China's economy will expand 8.2% this year, ahead of its prediction earlier this year of 7% growth.

Since the analyst made that call a few weeks ago, the Baltic Dry Index has risen roughly 30%, which leads me to wonder if that's because of the bullish call or improving industry conditions.

The Dry Bulk Shippers segment on CAPS is down almost 14% over the past 12 months, which suggests that Paragon Shipping has held up better than most. DryShips (NASDAQ:DRYS) is off by about 56%, and Eagle Bulk Shipping (NASDAQ:EGLE) is down 23%. Highly rated CAPS All-Star wheckster isn't surprised the sector is down, writing in this positive pitch for Paragon:

Very beaten down sector, which is to be expected in the midst of a huge economic recession. Well, guess what, we're getting out of it. So this will definitely outperform. If you're looking for a solid value stock, this is it.

Paragon operated 12 vessels in the second quarter and saw that quarter's profit fall, though on an adjusted basis it says it beat last year's results. While I might take that claim with a pinch of salt -- its adjustments include ignoring a $6 million non-cash charge for an impairment loss on a ship it recently agreed to sell -- time charter revenue did increase in the quarter even as the average rate declined.

Although there may be an oversupply of ships in the industry, more than 96% of all the CAPS members rating Paragon believe it will outperform the market and is worthy of the big upgrade it recently received.

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.