5 Superball Stocks
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 170,000 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:
How far from 52-week high?
CAPS Rating(out of 5)
|Ancestry.com (NAS: ACOM)||(39%)||$28.06||****|
|Silvercorp Metals (NYS: SVM)||(57%)||$7.02||***|
|Research In Motion (NAS: RIMM)||(66%)||$23.93||**|
|Netflix (NAS: NFLX)||(49%)||$155.19||**|
|ZAGG (NAS: ZAGG)||(27%)||$12.47||*|
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.
Christmas came early for stock investors last week. In a coordinated move, the central banks of Great Britain, Japan, Switzerland, and the U.S. Federal Reserve announced a plan to make dollar loans available to European banks that were having trouble getting access to dollars on private markets. The news capped a week in which the Dow Jones Industrial Average (INDEX: ^DJI) posted gains every single day. Of course, the Dow only has 30 stocks on its list. Not all stocks fared so well.
Above, you see five names that bucked the trend and managed to post their worst prices in a year. So what went wrong? It wasn't always clear. ZAGG, for example, had no bad news last week; to the contrary, on Wednesday ZAGG introduced a new keyboard accessory for Samsung's Galaxy Tab tablet computer, which should boost sales at the company.
In other cases, the reason for stocks' weak performance was painfully obvious: Weak subscriber numbers at Netflix. An earnings miss at Research In Motion. Allegations of fraudulent production numbers at Silvercorp's Chinese mines.
And then there's Ancestry.com. The clear favorite on today's list (among CAPS members, at least), four-starred Ancestry.com got walloped last week after tweaking the price plans it charges subscribers to its genealogical website. Contrary to what you might expect based on the sell-off, though, fellow Fool Rick Munarriz actually liked the news, and likes the stock. He's not alone.
The bull case for Ancestry.com
As CAPS member Clu11 points out, Ancestry is "the largest genealogy site in the world and is still growing at a healthy rate."
CAPS All-Star jazzysav says "these guys own the industry that serves the basic human need to know where we've come from."
And TXinvestor82 loves the company's "great, sticky subscription model with more eyeballs hitting its website every month."
Sure, Ancestry may not look like much of a bargain at first. Selling for 28 times earnings and 21% projected growth, you might even think it looks a little pricey. I mean, even Ancestry-rival Google (NAS: GOOG) only costs 20 times earnings!
But when you recall that Ancestry generates more than twice as much cash as it reports as net earnings on its income statement (a claim Google can't make), Ancestry's true cheapness becomes obvious. At a valuation of barely 11 times free cash flow, Ancestry would be fairly priced at just half the growth rate it's currently expected to achieve. On the other hand, if the company comes anywhere near to actually hitting 21% projected long-term growth, then Ancestry's stock is a bargain. And remember, Ancestry has exceeded growth expectations in three of the last four quarters.
Personally, I don't believe a move to raise prices on new subscribers, and lock in loyal longtime subscribers at lower rates, will hurt Ancestry's growth prospects. To the contrary, I suspect it will help the company boost earnings and reduce customer churn -- but that's just me.
What do you think about Ancestry.com's chances? Tell us about it on Motley Fool CAPS.
At the time this article was published The Motley Fool owns shares of Research In Motion and Google.Motley Fool newsletter serviceshave recommended buying shares of Netflix, Ancestry.com, and Google.Motley Fool newsletter serviceshave recommended buying puts in Netflix.Fool contributorRich Smithowns shares of Google. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 377 out of more than 180,000 members.Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has adisclosure policy.
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