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 135,000 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
Last week was a tough one for these five firms. LDK's earnings miss hit that stock hard, and did no favors for the rest of the solar sector either. Pick a solar stock, any solar stock -- from fellow list-ee Canadian Solar to First Solar (NASDAQ:FSLR) or Sunpower (NASDAQ:SPWRA) -- and you'll find it lost money last week. A quarterly loss was also to blame for Sara Lee's terrible tumble on Wednesday, while even superb earnings weren't enough to save Garmin from a Goldman Sachs (NYSE:GS) downgrade.

But the real mystery is what's going on with USG. It didn't report earnings, good, bad, or indifferent. It didn't get downgraded. In fact, far as I can tell, there was no news of note regarding the gypsum giant last week. Maybe that's why Fools are ignoring the chatter and continuing to make ...

The bull case for USG Corp
As far back as February, CAPS All-Star checklist34 was worrying about picking USG prematurely. So why buy it? "Warren Buffet is a USG shareholder, and he may be willing to help them if push comes to shove and they get in a bind during a protracted slowdown. This stock is highly cyclic, and its fairly near its all time low. USG is the No. 1 producer of drywall in the US, and drywall is forever."

In May fellow All-Star SavorTheMoment was "not thrilled about real estate right now. on the other hand, this company could easily capitalize off of any Obamanomics reconstruction efforts, and will also profit off of anyone looking to buy, fix, or remodel one of the many foreclosed homes around the country."

Looking out even farther (and longer -- this recommendation dates from November), yet another of our All-Star investors -- mulledover this time -- calls USG a play on the "[l]ong term recovery. Would like to see them start to build/buy plants in China (or export there)."

But if you ask me, that's the one thing USG should not do right now. Thanks to a scathing article in the Wall Street Journal a couple weeks back, Chinese wallboard has a very bad name right now. Turns out a lot of the stuff is contaminated, giving off noxious odors and fumes so nasty that they've been corroding (!) house wiring and killing (!!) air conditioning units. While it might be a good idea for USG to capitalize by exporting the stuff to China, USG would face some headline risk if it made wallboard in China.

Headlines aside though, I find it difficult to decide whether USG is a "buy" in its own right. Profitless since September 2007, debt-laden, and cash-burning, this is most definitely not the kind of company that I ordinarily invest in. On the other hand, the CAPS superstars named above didn't win their reputations in a lottery. Each and every one of 'em ranks in the top 10% of the investors we track on CAPS -- and they make some really good points.

USG does own the drywall industry in the U.S. Americans will begin buying (and building) houses again -- eventually. Last but not least, has anyone noticed that USG is selling for less than book value? Hint: Warren Buffett has, and so have the folks at Motley Fool Inside Value.

Time to chime in
Fools, I find all of this awfully intriguing. But lacking reliable profit numbers, I find it nigh on impossible to hang a valuation on USG. So help a Fool out, will you? What do you think USG is worth -- and why?

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