Can These Stocks Bounce Back?

Are these stocks ready to take on the market in a rubber match?

Rich Duprey
Rich Duprey
Mar 7, 2011 at 12:00AM

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.          

There are 125 stocks listed under "consumer non-durable" in the CAPS' screener, but more than a handful of them carry well-respected four- and five-star ratings. Those accolades mean our 170,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:


CAPS Rating Today (out of 5)

Recent Price

52-Week Price Change

Est. 5-Yr. Growth Rate

Cherokee (Nasdaq: CHKE)





Nike (NYSE: NKE)





Procter & Gamble (NYSE: PG)





Sources: Motley Fool CAPS; Yahoo! Finance.

The markets may be feeling better about the economy after a few reports have offset much of the drumbeat of negativism we've seen, but with the S&P 500 up more than 16% over last year, CAPS consumer non-durables stocks have done even better. The average stock is up 25% from the year-ago period, so let's take a closer look at why investors think some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.

Some spring in its step
Despite Target (NYSE: TGT) and TJX Companies (NYSE: TJX) doing brisk business last quarter, their private-label clothing supplier Cherokee doesn't seem to be having nearly as good a go of it. The clothing maker cut its dividend nearly in half in January to support its existing brands, and its executive chairman also stepped down after two decades with the company. Cherokee ended up taking out a $10 million loan to buy a big slug of stock from Margolis to see him off.

With the stock bouncing up from the worst of the plunge it took after whacking its dividend, investors like CAPS member kmote see recent licensing deals such as those it inked with China and Russia will drive future growth again. He also notes that even after cutting the dividend it still yields a healthy 4.7%:

Signed a contract with a Russian retailer for the Cherokee brand just this month with CJSC Tander's, Magnit Stores. They have over 1,000 stores across the Russian Federation. This was a brand available through Target. As they expand their intenational presence, margins will improve and the company will return to their high margins and dividends they once had.

Let us know on the Cherokee CAPS page whether the brand management company will soon go on the warpath again to return value to shareholders.

Play with this
The CAPS community's bullish outlook also extends to another apparel maker, Nike, which saw revenue rise 10% last quarter. Its stock is up 33% over the past year, but it still trades at a not unreasonable valuation.

As the largest sneaker maker, investors are expecting Nike to step up its game even more. Both Finish Line (Nasdaq: FINL) and Foot Locker (NYSE: FL) enjoyed improving sales despite the sluggish economy. We might have been able to intuit those results after Nike said last time out that its preorders for the December 2010 to April 2011 period were running 11% higher than a year ago. Particularly in the domestic market, which accounts for more than a third of Nike's total revenue, future orders were 16% higher. At less than 10% of total sales, China is a distant player in the total mix, but the sneaker maker's strength is growing there, with orders up 18% year over year.

CAPS member goalie37 says Warren Buffett just sold his stake in Nike because they were a pick of the retiring Lou Simpson, but the stock is worth another look on its own merits. The 1,810 CAPS members who rate Nike to outperform would undoubtedly agree, but just because 94% of the total rating it say it's going to beat the Street doesn't mean you should necessarily follow along.

Keep an eye on whether the sneaker maker can kick it into high gear by adding it to your watchlist.

It's all in the mix
Consumer products giant Procter & Gamble has found not only the recession a difficult time but the nascent recovery has been rough, too. Shares are up less than 5% over the past six months, and news that Spanish authorities are fining the company for participating in a price-fixing scheme could set it back again.

The European Union is also investigating P&G's role in the continentwide anticompetitive scheme. Companies routinely protest their innocence when allegations of misdeeds arise, but the $575 million dollars P&G has set aside to pay the European antitrust fines underscores just how much it expected to be found complicit. That's because there's no honor among thieves. A Spanish company that participated in the price-fixing itself ratted out the other players but is avoiding prosecution due to a Spanish law that shields it.

Even beyond that, CAPS member sopircepat says with consumers still slogging through the jobless recovery they aren't ready to be buying consumer goods in bulk and that investors need to have a long-term outlook:

consumers still hurting so may take a while, but well run company will do well as we come out of fin crisis, i think in less than 5 years

Add P&G to the Fool's free portfolio tracker to keep up to date on its potential, then head over to the Procter & Gamble CAPS page and let us know if there's a disconnect between its potential and its price.

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.