3 Stocks Making a Comeback

With all the volatility in the markets today, there's no shortage of market seers trying to call a bottom. Even Ben Bernanke has weighed in and called a bottom not once, but twice. And with the Federal Reserve acknowledging that what many are calling a recovery has slowed, some economists and market analysts argue that the worst is yet to come.

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 165,000-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 5,400 stocks, and even a nifty stock screening tool to help investors quickly zero in on potential investment opportunities.

I've used the CAPS screener to filter out $100 million-plus companies that have seen their stock price appreciate by at least 30% in the past 52 weeks even while they sit at least 40% below their 52-week high.

Source: Motley Fool CAPS.

Shares of iStar Financial got off to a strong start earlier this year, but the commercial real estate lender still faces significant debt maturities in the coming years. A 53% drop in second-quarter net investment income didn't help soothe investors, either, leaving many concerned about its future. While smoothie purveyor Jamba has enticed more CAPS members with its lower stock price recently, McMoRan Exploration ranks ahead of both with a top five-star CAPS rating and several large exploration prospects in the works.

The bottom case
CAPS members have laid out several reasons why McMoRan Exploration may have its stock looking nowhere but up today. With several exploration projects under way, there's definitely big upside potential in the next several years if McMoRan can capitalize on these developments.

Its Davy Jones prospect in the Gulf of Mexico, which it's working on with partners Energy XXI (Nasdaq: EXXI) and Plains Exploration & Production (NYSE: PXP), could be one of the biggest finds in the Gulf in years. Progress is looking positive at one of its Blueberry Hill wells, where McMoRan Exploration recently found potential hydrocarbon-bearing sands and continues to drill deeper.

Similar to others, like Anadarko Petroleum (NYSE: APC) and Suncor (NYSE: SU), McMoRan realized higher selling prices in the second quarter, helping it boost revenue by 11%. Some CAPS members believe the hit McMoRan's shares have taken following the BP oil spill has been overdone. While drilling contractors like Diamond Offshore (NYSE: DO) are dealing with customers trying to escape their deepwater rig contracts in the Gulf of Mexico, McMoRan says the shallow-water drilling it's been doing is unaffected by the deepwater drilling suspension in the Gulf.          

Or further to fall?
Even though McMoRan Exploration has several potential bonanzas lined up, the second quarter marked its ninth consecutive quarterly loss, and Wall Street analysts forecast more red ink for the foreseeable future. The high costs and extended periods of time necessary to produce results in projects like Davy Jones add to its risk profile. For instance, investors could be waiting another year or more before Davy Jones' ultimate flow rates are determined.     

Although McMoRan operates primarily in shallow water, investors see additional risk involved with operating in the Gulf of Mexico going forward. McMoRan partner Plains Exploration & Production is already planning to sell off its Gulf assets to focus on onshore plays, because of the regulatory scrutiny and expected higher operating costs in the Gulf.                     

What's your call?
Overall, nearly 97% of the 485 CAPS members rating McMoRan Exploration are bullish, believing it will outperform the broader market. For my part, since the risk of smaller E&P players in the Gulf has gone up, I'm inclined to look at bigger multinationals in the oil and gas space.

But what your own opinion ultimately counts most; 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 5,400 stocks that our 165,000-plus members have covered.