Are These Stocks 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.          

There are 83 stocks listed under chemicals in the CAPS' screener, but we've found more than a few that are well-respected with four- and five-star ratings. Those accolades mean our 170,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:

Sources: Motley Fool CAPS, Yahoo! Finance.

The markets may be feeling better about the economy after a few reports have offset the drumbeat of negativism we've seen, and with the S&P 500 up 7% over last year, CAPS chemicals stocks did slightly better. The average stock is up over 14% from the year-ago period. Of course, bolstering those returns were performances like those by Potash above and Lubrizol, which jumped 47% in the same period.

So let's take a closer look at why investors think that some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.

Some spring in its step
Chemicals maker Huntsman saw shares benefit after it beat analyst estimates of adjusted earnings, but its large debt load still weighs heavily on the company. With nearly $3.9 billion in debt far outstripping its $2.5 billion market cap, the specialty chemicals maker seems to be having trouble convincing investors it's worth more than it owes. No doubt those investors appreciate its dividend, which currently yields 3.8%, but there are red flags flapping over receivables growth. With Huntsman's third quarter seasonally weaker than the second, the bounce they've enjoyed in their stock might be short-lived.

Perhaps Sherwin-Williams and other coverings manufacturers can glean some hope out of Huntsman's assertion that its pigments business is witnessing increased demand. Although Huntsman competes with DuPont (NYSE: DD) for share in the auto market, Sherwin-Williams global finishes group also targets the auto market among others and the segment accounts for almost one-quarter of company revenue.

Circuit overload
Yet Huntsman knows what PotashCorp is currently experiencing as the latter is pursued as a takeover. Potash found the love of BHP Billiton (NYSE: BHP), which offered to buy the fertilizer maker for $130 a share, a 50% premium to what the stock had been trading at in early July. But with PotashCorp casting about to find a "white knight" to save it from the "inadequately low" bid, it's instead come up with a consortium of possible bidders that The Wall Street Journal dubbed a "white platypus." This consortium would be an ugly construct and likely use a leveraged buyout structure and load the company up with debt.

While CAPS investor djodts focuses on the fundamentals of the fertilizer business in giving Potash the thumbs up, uclayoda87 says management might not be so far off in trying to craft a better deal:

If the financial minds at BHP are willing to offer $130 per share plus the assorted fees and costs inherent in a large acquisition, then adding at least a 50%/year return on their investment would suggest that they believe the real short term value of the company is about $225/share. So [Potash's] CEO is correct when he remarked that the offer was way too low.

Let's hope it all doesn't fall apart for PotashCorp like it did for Huntsman. Add the fertilizer maker to your My Watchlist page and receive all the Foolish news and analysis about this stock.

Driving a bargain
Plant and animal nutrient products maker Yongye Biotechnology nearly doubled revenue in the latest quarter to $89 million, allowing profit to quadruple as Chinese farmers continue to buy up its Shengmingsu agricultural nutrient products. Yongye is as good as reason as any as to why you might not want to abandon China just yet.

While China Agritech (Nasdaq: CAGC) and China Green Agriculutre (NYSE: CGA) try to worm their way into the field, there are concerns about Yongye's use of cash. But with business being seasonal and its target customers rural farmers, cash flows might not be as smooth as we'd want.

CAPS All-Star member TMFRhino still sees Yongye International as being the best of the bunch. Particularly with all the concerns about accounting scandals in Chinese companies, investors can rest easier knowing it has a Big Four firm poring over its books:

However, in Yongye's case, there are reasons to believe the company is better managed than its peers. Our Global Gains team met with management on their recent China trip and walked away believing Yongye to be one of the better-run Chinese companies they encountered. Not only that, but Yongye uses Big 4 auditor KPMG. I don't believe its use of KPMG to be a trivial fact either; it recently affected the terms of how Yongye purchased a local distributor. The presence of the Big 4 accounting firm forces Yongye to act above board.

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.