5 Superball Stocks

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When stocks fall fast and far, they sometimes set themselves up for remarkable rebounds. The following equities suffered dramatic drops over the past week. With help from the 180,000 members of Motley Fool CAPS, we'll see whether any of them have the potential to bounce back.

It's been a while, but thanks to last week's sell-off, we once again have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders:

Companies

 

How Far From 52-Week High?

Recent Price

CAPS Rating

(out of 5)

Apogee Enterprises (NAS: APOG) (16%)$12.60****
Universal Display (NAS: PANL) (36%)$40.73***
Dendreon (NAS: DNDN) (75%)$11.14***
Northern Oil & Gas (ASE: NOG) (32%)$22.93**
InterOil (NYS: IOC) (28%)$58.58*

Companies are selected by screening on finviz.com for abrupt 10% or greater price drops last 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, at long last, the Dow returned to the 13,000 mark. Amid all the cheering, however, there were multiple pockets of pessimism. As the market's premier index hit its latest high, more than 4,000 separate stocks actually lost value -- in some cases, a lot of value. But why?

After all, with Brent crude oil topping $125 a barrel, the last thing you'd expect to see is speculative oil plays like Northern Oil and InterOil drop 10% of their market cap. Yet that's just what happened. At InterOil, investors are cursing George Soros' name, angered over him dumping the majority of his InterOil stake, news of which sent the shares tumbling. Meanwhile, Northern had no one to blame but itself. The company reported rising revenues for the fiscal fourth quarter, but failed to reduce its net loss even a bit, and disappointed investors sold it off hard.

In other earnings news, pioneering anti-cancer crusader Dendreon spooked the market by declining to predict when (if?) it will (ever?) become profitable. Considering that management had also reported weak Q4 sales and, of course, no Q4 profits, the guidance disappointment set Dendreon up for a fall. The stock ended the week down 25%.

Next up in the earnings hit parade: Universal Display. The OLED technologist saw its shares fall as much as 10% in overnight trading despite beating Wall Street estimates for both sales and earnings. UD has now put together three back-to-back-to-back profitable quarters, and generated nearly $14 million in free cash flow for the year. (So kudos all around.) Still, with a price-to-free cash flow ratio still in the triple digits, and long-term profit growth estimated at just 25% annually, the shares were probably ripe for a fall.

But what about the top-ranked stock on this week's list? Apogee Enterprises had no earnings news -- no news of any sort really -- to report last week. Yet the shares lost 10% of their market cap anyway. Does this bode ill for Apogee's next earnings release, due out next month? Or is it opportunity knocking?

The bull case for Apogee Enterprises
Some of the smartest investors in Fooldom are betting on the latter. CAPS All-star MJKpayday, for example, has been an Apogee fan since early 2010, calling this firm the "quintessential Hidden Gem"  and praising the Apogee for managing to grow its revenues "steadily ... including during the major recession."

Fellow All-Star greenwave3 thinks "long-term growth prospects are excellent" and "the company is solid in the long-run."

Apogee: Going back up?
I agree. After several money-losing, post-financial-crisis quarters, Apogee returned to profitability last quarter. Apogee's free cash flow has been positive for the past 12 months, and the company has produced positive cash flow in five of the past six quarters. The company appears to have turned a corner, and if that's so, could soon return to its historical performance.

And what kind of performance might that be? Over the past five years, which included some pretty tough times for the U.S. economy, Apogee still managed to generate close to $34 million in annual free cash flow. If it can return to that level of performance, then today's price would have Apogee trading for roughly 10 times annual free cash flow -- quite an attractive valuation from which to start a new run higher.

As a currently unprofitable company working in an essential (but boring) industry, and one where no higher-profile U.S. competitors are still operating, tiny Apogee may not be the most obvious candidate for a bounce back, but it's one value investors should keep an eye on. Once Apogee finishes rounding the corner, this dark horse could really run.

Like finding (and buying) tiny, bargain-priced stocks before Wall Street even discovers they exist? Then you're going to love our latest discovery. Read all aboutThe Motley Fool's Top Stock for 2012in thisfree report.

At the time this article was published The Motley Fool owns shares of Dendreon. Motley Fool newsletter services have recommended buying shares of Universal Display.Fool contributor Rich Smith does not own shares of (or short) any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 397 out of more than 180,000 members. The Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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