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

Investors should consider buying stocks after a big decline, when pessimism has unduly beaten good companies down to great prices. That's why we here at the Fool -- and 140,000-plus investors like us -- look to the Motley Fool CAPS community to help sniff out the real opportunities from languishing companies driven by speculation.

A real bottom or another leg down?
Of course, there's no foolproof method for timing a market bottom. 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. Once we've rounded up our candidates, we can use all the information in CAPS to test whether each company has already hit bottom or simply primed shareholders for further pain.

I've used the CAPS screener to find $100 million-plus companies that have seen their stock price appreciate by at least 15% in the past 13 weeks even while they remain at least 35% below their 52-week high. These stocks also have both a positive return on equity and earnings per share over the past 12 months. These criteria limit 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.


CAPS Rating
(out of 5)

Price Change

% Below
52-Week High

Eagle Rock Energy Partners (NASDAQ:EROC)




Permian Basin Royalty Trust (NYSE:PBT)




Precision Drilling Trust




Source: Motley Fool CAPS. Price return July 31 through Oct. 26.

The bottom case
Eagle Rock Energy has seen its stock beaten up over the past few years, but there are several reasons why those days may be over. The company's shares are trading at a forward P/E of 15.4, which is low compared to many peers. Many investors think natural gas prices are near a bottom and expect the relationship between natural gas and oil to come back in line with historical measures, a dynamic which holds a lot of upside potential over the long term at Eagle Rock as well as producers like Chesapeake Energy (NYSE:CHK), XTO Energy (NYSE:XTO), and Anadarko Petroleum (NYSE:APC).

In addition to its midstream business, Eagle Rock's acquisitions in upstream businesses in the past couple of years offer growth potential. And the company may be able to cash in on the bidding war that's ensued over its minerals business.

Or dead cat in disguise?
But while many conditions appear to favor Eagle Rock Energy's ascent, the company has its share of dead weight. For instance, a large debt load is pressing the company to focus on reducing its leverage, in part by considering the sale of more assets. The lower commodity prices that have affected numerous other energy companies, including ConocoPhillips (NYSE:COP) and BP (NYSE:BP), have also pinched Eagle Rock's top and bottom lines this year. It reported another loss in the second quarter and slashed its unit-holder distribution earlier in the year to conserve cash.

And natural gas prices may not return to higher ground anytime soon, as record-high U.S. underground gas inventories still exist and the potential for increasing liquefied natural gas imports threatens to keep it that way.

What's your call?
Overall, 97% of the 508 CAPS members rating Eagle Rock Energy see it outperforming the broader market. For my part, though, I'd rather put my money behind stocks that are on more firm financial footing; Eagle Rock's forward valuation would have to be a screaming buy to tempt me at this point.

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 140,000-plus members have covered -- whether it's related to expired felines or not.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 49 points on average, take a free 30-day trial.

Since getting some new sneakers, Fool contributor Dave Mock is showing a little more spring in his step. He owns no shares of companies mentioned here. Chesapeake Energy is a Motley Fool Inside Value recommendation. The Fool owns shares of Chesapeake Energy and XTO Energy. The Fool's disclosure policy sometimes gets wound too tight and needs a deep-tissue massage.