5 Stocks Ready to Bounce Back

However hard the market slams a stock, there's always the chance the stock will 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.

Among the 677 stocks in the services sector, we've unearthed a handful with top four- and five-star ratings. Those ratings mean some of our 130,000 CAPS investors are confident that these stocks will beat the market in the months ahead:

Source: Motley Fool CAPS; Yahoo! Finance.

Services covers a broad range of companies, from those that primarily serve other businesses, such as railroad giant Burlington Northern Santa Fe (NYSE:BNI), to those that cater to the public, like restaurateur McDonald's (NYSE:MCD).

Even though the average company in the sector lost about 26% of its value over the past year, you're still able to find some, such as KongZhong, whose share price has doubled, or Michael Baker, an engineering and energy services provider whose stock has almost doubled. So let's take a closer look at why investors might think some of these companies won't just be jumping from the frying pan into the fire.

Some spring in its step
With terrorism an ever-present concern, the products and services of China Security & Surveillance Technology are tailored to a growing market in China. In its latest earnings report, the company said its profits fell 55% for the quarter, on revenue that grew 34% over the first quarter of 2008. Although the company considers U.S. companies such as GE and Honeywell to be competitors, security and surveillance is still a nascent industry with no dominant players, so China Security & Surveillance is building itself into one through acquisitions.

Its business is primarily manufacturing and installing video surveillance equipment, and many of its opportunities are spurred by government regulations. For example, the government is spending $6 billion to $12 billion for surveillance and safety equipment for the 2010 World's Fair in Shanghai. Ordinances say street surveillance systems must be installed in 660 Chinese cities, while all entertainment venues, justice departments, and even coal mines must have them.

It seems the primary hurdle that China Security & Surveillance faces is that it has few recurring sources of revenues. After its cameras and DVR systems are installed, there are few opportunities to go back and sell additional equipment, so the company must continuously seek out new customers if it wants to grow at the same pace. And it has been growing. Revenue has risen 124% annually on a compounded basis over the past three years, while operating-earnings growth exceeded 77% over that same period.

The company's shares have risen, too: 49% for the year and 164% from their lows in March. While CAPS member Jonock likes the company as an industry leader in a growing sector, Wakester0 found the omnipresence of security in China to be a clear signal to buy shares.

I was in China recently and was struck by the security precautions still in places. Just getting on the Internet requires a copy of your passport, as well as a warning that going to any subversive sites would be punished. The message was clear; I brought that message home and bought a good security and surveillance stock. Still selling at half it's one year target of 9.64.

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 on whether you think these stocks are ready to bounce back.