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.
Five super falls -- one superball
There are no two ways about it. If you owned any of the five stocks named above last week, you're significantly poorer for it today. Beginning at the bottom, Polymet shares lost their shine when the company announced Monday that it will delay filing its financial statements while dealing with unspecified "difficulties" encountered in transitioning to "a new accounting and financial reporting system."
At Visa, the problem was accounting for all the profits the company's about to lose. The government plans to reduce the interchange fees banks can charge for debit card transactions by 75%, to as low as $0.07 per transaction. Investors fear margin-squeezed banks will demand that Visa and MasterCard scale back the network fees they pay accordingly, eating into the plastic purveyors' profits.
DryShips struck a different reef. Its widely anticipated sale of a stake in its Ocean Rig subsidiary fetched only $17.50 per share, far below the estimated top price of $21.50. When the news broke, so did investor enthusiasm for DryShips' stock.
Perhaps the unkindest cuts of all, however, were what happened to our list's two tech stocks. Downgrades from Kaufman Bros. and Citigroup (for LED manufacturing equipment suppliers Aixtron and Veeco
Which of these things is not like the others?
There's troubling news on all five fronts, to be sure. But while investors have been scared onto the sidelines on four of these stocks, there's still one they back unconditionally. That stock is JA Solar, and it's CAPS members' top pick of the week.
Why do Fools love JA Solar? CAPS All-Star Staka lays out the bull thesis on this one in a few bulletpoints: "Huge growth, good margins, low P/E ...Industry with long-term growth potential. ... price / quality leaders. Should ensure them a growing market share."
CAPS member tonky007 adds: because "JASO is a Chinese company (emerging economy that hasn't reached its full potential), I believe that with the trend to move to renewable energy, companies like JASO are in a good position to cash in and become the world's energy provider in solar technologies."
Within China, All-Star investor Geofiz tells us, "JASO (and previously SOLF) [are] the two most innovative, low cost solar companies. Solar will inevitably become a fundamental solution in providing energy in many parts of the world ... There will be bumps in the road to be sure, but long term demand is essentially a given, so I'm betting on what appear to be the best players."
Buy the best; ignore the rest
Which seems a sound strategy to me. And it doesn't hurt that, last time I looked into this industry, I, too, came away impressed with JA Solar. Along with Solarfun and ReneSola
In its most recent quarterly filing, JA confirmed that its hoard of yuan-denominated cash and equivalents increased by 203 million RMB over the past nine months, with restricted cash rising by a further 123 million RMB. This is on top of the $76 million in free cash flow the company produced last year. While we won't know JA's exact free cash flow rate until it reports its annual results in February, so far it looks like the company is continuing to generate positive free cash flow from its business.
With an ultra-low P/E ratio of just 6.2, and free cash flow aplenty, JA Solar looks to me like a stock with true bounce-ability. But that's just my opinion. If you have a different opinion of the company, here's your chance to tell us about it. Click over to Motley Fool CAPS, and sound off.
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. 606 out of more than 170,000 members. The Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.