5 Superball Stocks

When stocks fall fast and far, they sometimes set themselves up for remarkable rebounds. The following equities suffered dramatic drops over the past week. With help from the 170,000 members of Motley Fool CAPS, we'll see whether any of them have the potential to bounce back:

Companies are selected by screening on finviz.com for abrupt 10% 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's no two ways about it. If you owned any of the five stocks named above last week, you're significantly poorer for it today. So what went wrong?

In Motricity's case, the stock seems to be still feeling the effects of a "revenue miss" two weeks ago. Similarly, STEC's bubble got popped when it reported strong quarterly numbers -- but gave week guidance Tuesday. And of course, that same day North American Palladium cut its production forecast for the rest of this year -- sparking a precipitous drop in share price.

In contrast, Youku.com should have had a good week last week. On Monday, Barron's reported that Apple (Nasdaq: AAPL) was considering "swapping out" YouTube for Youku as the video app-of-choice on iPhones, iPads, and iPods in China. Problem was, just a few days later Youku undid any bounce it might have enjoyed, by announcing a dilutive $678 million secondary share offering. Hearing the news, investors dumped the stock.

And finally, our top-ranked stock for this week: Horsehead Holding. As Travis Hoium recently pointed out, Horsehead "beat" on both earnings and revenues when it reported earnings a few days ago. Management was bullish on future demand for its product (Hint: "ZINC.") TheStreet.com said the stock's got "upside." Yet despite all this, the stock is getting cheaper -- leading a lot of Fools to wonder if there's ...

A bull case for Horsehead Holding
Why do Fools love Horsehead? The reasons vary. CAPS member dtor, for example, seems to view the stock as a trading play, one in which you "recycle then sell the results" when the company beats estimates. (That's starting to look like good advice.)

In contrast, Fools like FoxKestrel argue there's a longer-term reason to own Horsehead: "Increasing demand for 'green' transportation and solar energy systems suggests an increasing demand for batteries and related technologies incorporating zinc components." Meanwhile, CAPS member johwjohn has long been attracted to the fact that Horsehead's " Profits are good and they have no debt."

johwjohn first pointed this out to us nearly two years ago, but it's still true today. In contrast to bigger rivals such as Teck Resources (NYSE: TCK), Horsehead continues to sport a net-debt-free balance sheet. Nor does it need it -- the company's pegged for growth almost as good as Teck's. The stock's priced at a premium, of course, selling for 22 times trailing earnings versus Teck's 18 P/E, but that gap's set to shrink over the next few quarters, as valuations contract and bring Horsehead within just a point or two of Teck's P/E.

Foolish final thought
Will this contracting P/E become spring that launches ZINC into a new bounceback? Personally, I'm skeptical. I prefer to make my investing decisions based more on what a company has actually earned, rather than what analysts think it might earn in the future -- and in this regard, the company's 22 P/E looks a little steep for Horsehead's 10% projected growth rate.

But that's just my opinion. Clearly, a lot of Fools disagree with me, and at the Fool's own Motley Fool Hidden Gems, the stock's actually an official recommendation! Who's right on this debate? Maybe you are. Click over to Motley Fool CAPS now, and tell us how you think Horsehead Holding will perform.

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