These Stocks Are Bouncing Back

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.          

Of the 50 stocks listed under "automobiles" in the CAPS' screener, we've unearthed more than a few with four- and five-star ratings. Those accolades signal our 160,000 CAPS members' confidence that these stocks will beat the market in the months ahead. Let's see what members are saying about the candidates below:

Source: Motley Fool CAPS; Yahoo! Finance.

Up until yesterday's market freakout, the broad market averages had staged a pretty bold recovery. Even automotive stocks had performed admirably, with the average company doubling in value year over year. Of course, those returns include strong performances not only from the companies above, but also from trucking companies Wabash National (NYSE: WNC), which jumped 284%, and Oshkosh (NYSE: OSK), which tripled in value.

Let's examine why investors think that some of these other companies won't jump from the frying pan into the fire, now that the market has fallen from its lofty heights.

Some spring in its step
The U.S. auto market has staged a nice rebound, with Ford (NYSE: F) in particular selling more and better cars month after month. GM has done better, too. Although the company was slightly premature in boasting that it had repaid U.S. taxpayers for its bailout, at least it no longer looks like a crash-test dummy.

Yet the real growth in the automotive industry won't come from Detroit, sad to say, but rather from emerging markets like India and China. Especially China. Even U.S. automakers are counting on the country to rev their growth engines. General Motors said that auto sales in China grew more than 41% in April. The company expects annual sales there to exceed 2 million vehicles this year, a figure that could hit 3 million by 2015.

If domestic and import companies are driving ahead, the auto-parts market that supports the industry might offer investors opportunities to hitch a ride. Chrysler, for example, teamed up with China Automotive Systems (Nasdaq: CAAS) to make parts for its vehicles.

No wonder it's growing
Wonder Auto Technology makes electrical components, suspension products, and engine accessories in China. The company reported more than $63 million in sales in its recent quarter, following through on last month's updated guidance that raised revenue forecasts above previous expectations of $58 million. Its alternators and starters are targeted to the small and midsize vehicle market, the exact focus of the Chinese government's stimulus plans.

CAPS member Lants says Wonder Auto has hit the trifecta of long-term growth potential: "Their website says China's auto industry grew 55% in February. [Wonder] is quickly growing company in a quickly growing industry in a quickly growing country."

SORL Auto Parts, a maker of air brake valves, similarly benefited from a turnaround in the trucking industry. By focusing on its domestic market (international sales fell 34% for the full year), it nearly tripled fourth-quarter profit to $5 million on a 63% increase in revenue.

armyofmeat says that SORL and the Chinese auto market will benefit from the nation's shifting demographics: "Good time to pick this up as its price climb has hit a lull. With the uptick in the global economy, the expansion of the middle-class in China will drive demand for consumer and commercial vehicles."

Taking aim at growth
According to the Society of Indian Automobile Manufacturers, car sales in India surged 26% last year. They are expected to grow another 15% in 2010, even though taxes and interest rates are rising. But CAPS member blaine567 expects Tata Motors to become a force to be reckoned with, not only in the Indian market, but also around the world:

India's economy is growing and more people will be able to afford cars. [Tata] is poised to sell affordable cars in India. If [Tata] plays it smart they will eventually export cars to the rest of the world (think Hyundai and Kia). There is a lot of upside potential for [Tata].

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.