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 1,601 stocks listed under the CAPS financial sector, we've unearthed more than a few with five-star ratings. This accolade means our 145,000 CAPS members are confident that these stocks will beat the market in the months ahead. Here are a few of them:

Source: Motley Fool CAPS; Yahoo! Finance.

As the broader market averages have staged a pretty bold recovery since their depths back in March, even financial stocks have had a pretty strong run up, with values of the average company up over 35% from the year-ago period. It's run the gamut from KKR Financial jumping more than 500% in the past year, to Synovus Financial tumbling 78%. That obviously doesn't include the financial firms that have gone belly-up in the past 12 months, either.

So let's take a closer look at why investors think that some of these other companies won't be jumping from the frying pan into the fire from the market's lofty heights.

Some spring in its step
Unlike E*Trade Financial (NASDAQ:ETFC), which has yet to recover from its forays into the mortgage morass, Interactive Brokers avoided such divergent lines of business. That doesn't mean the business lines it has are performing at peak health right now, but it has been able to maintain its liquidity and avoid much of the speculation that surrounds its rival.

Interactive Brokers' market-making segment income took a tumble last quarter, falling 74% from the year-ago period as high-frequency traders pressured margins and stole market share. HFTs are professional traders like Goldman Sachs (NYSE:GS) who use supercomputers, unique trading strategies, and even unique computer position to outmaneuver the markets and reap billions in profits at other traders' expense. They're able to execute millions of transactions in seconds and are given priority by the exchanges over market makers. Possibly those huge bonuses that Goldman employees are set to pocket were paid for in part by the profits made here.

Electronic market making is the larger of Interactive Brokers' two segments, but even this segment fell, with operating earnings down 3% from the year ago period. Still, CAPS member irishred1 believes greater volumes in that segment will eventually return:

Watch CNBC for a while and you see Interactive Brokers commercials all the time. They are one of many online market makers/brokers that allow us to trade and invest. Some investors might be scared away from this stock, thinking that due to the crisis people will shy away from investing and trading. If you think, as I do, that investing and trading will continue in the future as more and more people jump in the market, this is a great choice. It seems that they have decent management, and I don't see any excessive risk taking (such as the subprime loans [E*Trade] is working through) that should be a concern.

A heart of gold
Considering EZCORP is primarily a pawnbroker, it's surprising that during a recession it has fared the worst in an industry that includes a mix of payday lenders who have been under assault from many quarters. Despite the microfinance business facing severe regulation that may just chase it out of town, top payday lender Advance America has more than tripled in price compared to EZCORP's 9% decline.

Revenue and earnings have been growing, even though its stock has not. CAPS member crashsurvivor09 says an improving economy might be the one thing that sets it back. "With double digit unemployment and the pressure of the holiday season on desperate people this may be one of the best short term plays around if you are able to get in. ... The only thing that hurts this stock is an improvement in employment and I think that is at least a year off."

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.