Are you a risk taker? Here we list stocks that are stuck in a downtrend -- trading below the SMA20, SMA50, and SMA200.
Before you think these companies offer great value, pay close attention to trends in their accounts receivable -- all of these companies have seen accounts receivable grow faster than revenue during the most recent quarter.
All of these companies have also seen accounts receivable grow significantly relative to current assets.
Interested in reviewing the key concepts here?
Downward rally: When a stock is stuck in a downward-trending rally, it means it is performing below its moving average for a given time period. It is presented as a percentage of performance relative to the average. When a stock is performing below its 20-day moving average (MA or SMA) as well as its 50- and 200-day moving averages, it signals bearish momentum. All the stocks in this list are rallying below their 20-, 50-, and 200-day MAs.
Accounts receivable is a big part of revenue for many companies, but it is also a potential source of problems.
Receivables represent money earned but not yet collected, so when receivables become a larger part of the revenue reported by a company, it indicates lower-quality revenues. This is because there is no guarantee that the money will be paid back in full.
Assets: Any property or holding that has tangible value is listed as an asset. This can include cash, product inventory, accounts receivable, land, equipment, investments, and more.
There is no right or wrong proportion of current (short-term, liquid) assets and long-term assets. However, dwindling cash and current asset levels should be a concern -- it may be a sign of growing illiquidity, which can hamper or even paralyze a company.
Now that you're aware of the implications of accounts-receivable trends and negative rallies, use this list as a starting point for you own analysis.
Is this a list of falling knives? What do you think?
List sorted by distance from SMA200. (Get access to free, interactive tools to analyze these ideas.)
1. TransAtlantic Petroleum
2. James River Coal
5. WMS Industries
10. First Solar
Interactive Chart: Press Play to compare changes in analyst ratings over the past two years for the stocks mentioned here. Analyst ratings sourced from Zacks Investment Research.
Disclosure: Kapitall's Eben Esterhuizen does not own any of the shares mentioned above. Becca Lipman owns FSLR. Data sourced from Google Finance.
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