5 Superball Stocks

"'Don't catch a falling knife' ... The idea of buying a former superstar stock at a discount price certainly has its attractions, but you've got to make sure you catch the haft -- not the blade."

So runs the thesis of my recurring Fool column "Get Ready for the Bounce," in which we search among the wreckage of Mr. Market's overturned cutlery drawer, hoping to find future winners in a pile of 52-week losers. But do we really need to sit around for a whole year, waiting for a potential bouncer?

I say nay. Sometimes, stocks fall far 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're going to look at a few equities that've suffered dramatic drops over the past week. With a little help from the 140,000 members of Motley Fool CAPS, we hope to find an opportunity or two for you:

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
Each of these companies took a terrific tumble last week. From bottom up, we saw Evergreen mauled in the continuing solar rout. American Capital owed its decline to a credit ratings downgrade courtesy of S&P. While Thompson Creek got perversely punished for trying to improve its balance sheet -- with a secondary offering that would raise about $225 million, but dilute its existing shareholders by as much as 14.5% in the process.

Sigma Designs' decline, in contrast, was positively plebeian. The company earned less than expected, and promised to earn less again next quarter. (So what else is new?) What really interests me, though, is the decline in share price at TETRA Technologies. Like Sigma, TETRA's earnings declined in its last report -- but that was three weeks ago. Since then, there's been no news of note at TETRA, but the shares continue to slump. Might now be the time to jump back into the stock, before someone notices that it's getting cheaper for no good reason?

Let's find out.

The bull case for TETRA Technologies
Who is TETRA? Basically, it's an oil and gas services company, which helps the big names in hydrocarbons -- ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), and Chesapeake Energy (NYSE:CHK) -- to extract black goo more efficiently, plug the holes when they've gone dry, and fix the drilling platforms and pipelines after Mother Nature wreaks havoc upon 'em. Back in 2007, CAPS member WyattKaldenberg called TETRA a "great gas and oil company at a fair price." (And perhaps after underperforming the market by 35 percentage points since then, it's 35% fair-er today?)

wthomas1 recommended the stock back then as well, calling TETRA a "[u]nique combination of drilling resource materials and heavy equipment for well servicing." Around that time, the price of oil stood about where it does today. But CAPS All-Star Trimalerus recently argued that oil will be pricy again. Writing in April: "Oil & Gas markets are destined to return to former high values, in time. Economic recovery will increase Energy demand, which will then push growth in this sector and the overall economy which will lead to more demand, etc."

As for whether betting on TETRA itself is the right way to play the trend, though ... I'm not so sure. Burdened by debt, eking out a small profit in each of its last two quarters, and seemingly incapable of generating consistent free cash flow (annual cash burn has averaged close to $58 million over the past five years), TETRA is clearly not the kind of company I ordinarily invest in.

That said, I do see a couple of points in its favor. For one thing, analysts are bullish that the company will pull through this oil slump and emerge to 15% average annual growth on the other side. For another, the same cash burn that has me leery of the stock appears to be abating. The last 12 months have seen TETRA's operating cash flow revive to nearly its 2007 levels. Meanwhile, capital expenditures are well off their highs of last year.

Time to chime in
As these two lines converge, TETRA's finally within spitting distance of free cash flow-breakeven -- and could go positive soon. Personally, I'm not interested in owning the stock until it does ... but I also recognize that the best time to buy a stock is before the good news happens -- not after.

Which is where you come in. I might be too scared to buy TETRA today, but you can still save others from their foolish fears (or conversely, warn them away if those fears are justified). So what do you think? Will this superball bounce back, or fall flat? Click on over to Motley Fool CAPS now, and sound off.

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