3 Stocks Springing Back

With all the volatility in the markets, there's no shortage of market seers trying to call a bottom. Fed Chairman 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 145,000-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 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 filter out $100 million-plus companies whose stock price has appreciated by at least 20% in the past 13 weeks, even while they remain at least 50% below their 52-week high. 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 Sept. 4 through Nov. 30.

The bottom case
You don't have to look very far to find a number of reasons why its worst days might be behind American Capital. The private equity company has been making progress in recent months with its finances, and, like Ares Capital (NASDAQ:ARCC), posted positive earnings for the third quarter, compared with a loss last year. With market conditions improving in recent months, helping it and others like Apollo Investment (NASDAQ:AINV), American Capital's portfolio appreciated for the first time in nine quarters. And it realized $463 million from portfolio investments and other transactions in the third quarter, like the sale of its stake in a life-sciences equipment maker to Corning (NYSE:GLW). Also, the company recently reached a deal with some of its lenders to restructure its revolving line of credit and is making progress with its remaining debt. Some CAPS members think that the company has the potential to reap big gains from its investment portfolio -- as long as it can survive.    

Or dead cat in disguise?
Even though American Capital may look like it's on the cusp of something big, the company is not out of the woods yet. Its net operating income fell 84% in the third quarter;  the economy is still weighing on operations, just as it is with competitor Allied Capital (NYSE:ALD), leading to losses for the quarter. Its deal with creditors calls for American Capital to fork over a large amount of its cash to pay down debt, leaving it with less flexibility for future deals. And some investors believe it may need to continue selling assets or raise fresh capital. Unlike American Express (NYSE:AXP) or other bailout recipients, American Capital doesn't have a government safety net. It has said that if it can't reach new debt agreements with all of its lenders, it plans to pursue bankruptcy protection. And even if the company does reach agreements with lenders, some investors think shares could continue to be pressured by other challenges.

What's your call?
Overall, 94% of the 2,039 CAPS members rating American Capital are bullish. In my opinion, the stock remains a very high-risk play because so much of its future rests with its lenders.

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 free, and you can even add your own insight on any of the 5,300 stocks that our 145,000-plus members have covered -- whether it's related to expired felines or not.