In my recurring Fool column, "Get Ready for the Bounce," we search for future winners in a pile of 52-week losers. But do we really need to sit around for a whole year, waiting for a fallen stock to bounce back?
Nope. Sometimes stocks fall hard, in far less time than a year. And like a superball dropped from the balcony, the harder they fall, the higher they bounce. Today, we'll look at a few equities that've suffered dramatic drops over the past week. With a little help from the 170,000 members of Motley Fool CAPS, we hope to find an opportunity or two for you:
How Far From 52-Week High?
Companies are selected by screening on finviz.com for abrupt 5% or greater price drops over the past week. 52-week high and recent price data provided by finviz.com. CAPS ratings from Motley Fool CAPS.
What a week!
Sure, sure, the Dow hitting 11,000 is now officially "last week's news." True, the S&P 500 gained less than a percent for the week, but what a way to end it! Google up 10%. Seagate possibly going private. AOL officially now making moves to reinvent itself, perhaps with a purchase of Yahoo!
We certainly got our week's worth of good news. Unfortunately, not all investors were happy with their updates. Up above you see three stocks that lost big for the week; on the other hand, you also see three stocks that have become remarkably cheaper to buy than they were just a few days ago. Should you buy them?
Judging from the ratings of SandRidge and TransAtlantic, a lot of Fools think now is the time to buy. CAPS member bargain123 believes SandRidge in particular will prosper because the "US has plenty [of natural gas and] is going to export it [to] other energy hungry over populous developing nations like China, India." (And yet, word has it the CEO has been dumping his shares ahead of earnings next month.)
CAPS member 1slowfrc prefers TransAtlantic Petroleum, praising the company for possessing "great financials and ... the Turkish government is backing them." (As for me, I'm not sure what's so great about negative earnings and $164 million in annual cash burn.)
One stock I think we can all agree has potential, however, is Manitowoc. Five-star rated on CAPS, paying a dividend, and bursting with free cash flow -- it's my personal fave.
The bull case for Manitowoc
CAPS member justnuts admits that Manitowoc has been hit hard by the drop in construction, but insists this is a good company and believes that as the economy rebounds so will Manitowoc's Cranes manufacturing division.
Last but not least, bringing it all together is CAPS All-Star investor steelheart100, who notes that whichever business is booming best, this "well run company" is "steadily paying back debt used for recent acquisitions," and improving its balance sheet by the day.
Building a profitable foundation
Mind you, I'm no fan of debt, and Manitowoc sure has a lot of it -- more than $2.2 billion of the stuff, alongside less than $120 million cash. That certainly puts Manitowoc at a disadvantage in the kitchen cook-off against less-burdened rivals Illinois Tool Works
Likewise, on the construction equipment side of the business, few rivals carry debt loads as big as Manitowoc's. Terex
Still, with annual free cash flow approaching $325 million, Manitowoc seems capable of (and in fact, is) chipping away steadily at its debt load, becoming more competitive with each debt-dollar it deletes.
Meanwhile, as things stand today, Manitowoc's enterprise value is only 11 times as big as its free cash flow. To me, that seems entirely reasonable in light of the 11% long-term growth rate Wall Street projects for the company. Toss in a respectable 0.7% dividend (which discourages the shorts, even as it rewards patient investors on the long side), and I do believe Manitowoc can outperform the market from today's prices.
Of course, that's just my opinion. What's yours?
Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 604 out of more than 170,000 members. The Fool has a disclosure policy.
True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.