Can These Stocks Bounce Higher?
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 71 stocks listed under "consumer durables" in the CAPS' screener, but more than a handful of them carry well-respected four- and five-star ratings. Those accolades mean our 180,000 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:
CAPS Rating Today (out of 5)
52-Week Price Change
5-Year Growth Rate
|Pitney Bowes (NYS: PBI)||****||$18.80||(12%)||8%|
|Sturm, Ruger (NYS: RGR)||*****||$25.98||89%||NA|
|Xerox (NYS: XRX)||****||$6.97||(34%)||21%|
Source: Motley Fool CAPS; Yahoo! Finance; NA = not available.
International and financial worries are again gripping the market, but with the S&P 500 still up 4% over the last 12 months it might not be so surprising to learn the CAPS consumer durables stocks have done worse, falling almost 8% in that same time span. So let's take a closer look at why investors think 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
Providing just 38% of its total revenue, Pitney Bowes' North American small-business mail unit accounts for more than two-thirds of its quarterly operating profits, but sales fell 5% in the second quarter as economic uncertainty continued to weigh heavily on operations. It's seeing the leasing of its mail machines continue to expand, but while they generate more revenue for the business, mail specialist leasing tends to be less profitable than sales.
Those conditions don't seem to be changing soon either. A survey of more than 1,700 small-business CEOs by the University of Michigan showed a 20% decline in confidence over the past two quarters for the economy's outlook over the coming year. That's translating into cuts in capital spending and plans for hiring, and less than half the firms surveyed expected profits to grow. It's the lowest level of confidence found by the survey since we were in the teeth of the last recession.
That could be a wedge for companies such as Stamps.com (NAS: STMP) , particularly if businesses try to save costs by digitizing their mail, or even eBay's (NAS: EBAY) PayPal online payment services. Yet Pitney Bowes and its metering machines have the reputation and experience backing it, and alternative services aren't easily translated into bulk mailing options.
With a dividend yielding just under 8%, the postage leader does attract investors like CAPS member shadestrades who says getting paid to wait for growth isn't a bad deal.
Pure dividend play. With a 7.76% yield, the shares will be paid for by the dividend in 12.6 years. After that, it's free (minus taxes) money. Just like buying rental real estate.
Let us know on the Pitney Bowes CAPS page if it can stamp out doubt, then add the stock to your watchlist to keep an eye on it.
A rare opportunity?
FBI background checks for firearms purchases have soared almost 44% since 2006 and rose more than 3% in 2010. While the law enforcement agency says you can't necessarily extrapolate background checks to gun sales -- there's no one-to-one correlation -- one can still make the assumption that if more people are looking to buy guns there ought to be more sales.
All of which helps explain why Sturm, Ruger saw sales climb 25% last quarter. Even troubled Smith & Wesson Holding (NAS: SWHC) said it expects sales to be up 10% for the year, which as fellow Fool Rich Smith notes, might be a lowball number since backlog last quarter was up 153%. Sturm's stock has pulled back 30% from recent highs and trades at just 13 times next year's earnings.
CAPS member Ikaris thinks the laws will eventually catch up with the need, which portends further growth for Sturm.
The biggest name in guns. Down a lot today but should pick up later this month. Concealed handgun permits are an eventuality IMO.
Take aim on the Sturm, Ruger CAPS page and check its progress by adding the stock to your watchlist.
Back in the day, Xerox was a tech giant and was part of the Nifty 50. But that was long ago. Today, it's still a tech company, but its services segment far outstrips its technology department, which has suffered from declining revenue for several quarters now. And its stock reflects the situation, down 38% year to date and at a level not seen since the country climbed out of the recession.
it pays a respectable dividend and generates plenty of cash. The company has plenty of naysayers, but that just makes it a classic kind of contrarian investment
You can copy Xerox's progress by adding it to the Fool's portfolio tracker feature.
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.
At the time this article was published Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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