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 180,000-plus 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?
(out of 5)
|Annaly Capital Management (NYS: NLY)||(14%)||$15.48||****|
|National Bank of Greece (NYS: NBG)||(78%)||$0.60||***|
|Universal Display (NAS: PANL)||(30%)||$44.31||***|
|MannKind (NAS: MNKD)||(67%)||$3.35||**|
|Human Genome Sciences (NAS: HGSI)||(60%)||$12.00||**|
Companies are selected by screening on finviz.com for abrupt price drops of 5% or greater over the past week. Recent price, and 52-week high, data provided by finviz.com. CAPS ratings from Motley Fool CAPS.
Five super falls -- one superball
Nearly 3,000 of Wall Street's best and brightest saw their market caps decline last week, as the stock market made a brief visit to bear market (down 20% from a recent high) territory on Tuesday. True, the Dow Jones Industrial Average (INDEX: ^DJI) managed to pull out of its nosedive, and end up for the week. But this came as little consolation to shareholders of the five stocks named above -- each of which still lost 5% or more of its market cap.
So what went wrong? At Human Genome there was no new news except maybe some reaction to older news. But with earnings due out in just two weeks, investors may be looking to cut their losses before bad news has a chance to strike. Meanwhile, peer biotech MannKind suffered bad news of its own making. Already $425 million in debt, the cancer researcher announced plans to float an additional $370 million in debt Thursday. That'll go a ways toward preventing a cash-crunch at this perennial money-burner, but it will also put MannKind deeper in hock to its creditors.
In contrast, Universal Display recently booked a deal with Samsung that will make it some cash. However, in opting for a license fee for use of its organic light emitting diode technology, rather than establishing an ongoing royalty stream, UD may have lost its chance to fully profit from growing acceptance of OLED technology.
And as for National Bank of Greece ... well, the name probably says it all. Like most of the stocks on this week's list, the NBG just isn't wowing investors today, and receives only a mediocre three-star rating on CAPS. But the good news is that we do have one company on the list that investors like better. Hit hard by rising "repo" rates, Annaly Capital Management remains a Fool favorite, scoring four stars on CAPS. Why do Fools like it? Let's find out ...
The bull case for Annaly Capital Management
If there's one thing about Annaly that investors love most, it's the dividend. CAPS member acts20 sees Annaly paying out a "14% divey for at least a year." (And its trailing dividend yield from the past year was 15.6%.)
Buntree believes that "as long as the interest rate remains low and the dividend of this company remain high it should be a good investment."
And with stock markets basically flat for the past year, that's saying a lot. CAPS member mtatz sees "the S&P ... going sideways at best for the foreseeable future." But "NLY will provide solid returns through it's high yield for years to come."
I agree. While Annaly may not appeal much to growth investors (it's only expected to grow earnings at about 2% per year for the next five years), it's priced appropriately low for such prospects. The P/E here is roughly six times earnings, both trailing and forward, which is cheaper than rival Capstead (NYS: CMO) , despite having a similar dividend yield. And it's this same low stock price that explains why Annaly's dividend yield is so high. Were the stock price to rise, the "yield" of Annaly's dividend would necessarily fall.
This is good news for two reasons: First, I doubt many investors would mind getting a lower dividend yield if it meant their shares were going up in value. Second, the fact that Annaly's high dividend yield is owed to a low stock price, rather than to management promising to pay more dividends than it can afford, should reassure you. There's little risk of Annaly needing to cut its dividend. Indeed, the stock's paying out only 87% of profits in dividends today, meaning that if you decide to buy this stock for its dividend, chances are you'll get what you bargained for.
Time to chime in
Of course, as Dennis Miller used to say "That's just my opinion. I could be wrong." If you have a different read on Annaly Capital, I'd love to hear it. Click over to Motley Fool CAPS now, and tell me why I'm wrong.
Looking for more ways to enhance your profits -- safely -- with dividend-paying stocks? Read our free Fool report:13 High-Yielding Stocks to Buy Today.
At the time this article was published Fool contributorRich Smithdoes not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 282 out of more than 180,000 members. The Motley Fool owns shares of Annaly Capital Management.Motley Fool newsletter serviceshave recommended buying shares of Universal Display. 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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