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 members of Motley Fool CAPS, we'll see whether any of them have the potential to bounce back.

We have a chance to stand beneath Mr. Market's silverware drawer in hopes of snagging a bargain. Let's meet today's contenders:

CAPS Rating(out of 5)

Johnson Controls (NYS: JCI)




Travelzoo (NAS: TZOO)




Exact Sciences (NAS: EXAS)




First Solar (NAS: FSLR)








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
Investors cheered last week as the Dow climbed steadily each day of its abbreviated four-day span, and closed 2.4% higher than it began. But not everyone was happy. Up above you see five stocks that lost value even as everyone else was gaining. What went wrong?

Beginning at the bottom, shares of bonds-insurer MBIA continue to languish, victims of litigation risk. Several bankers are suing the insurer over its decision to segregate its unprofitable mortgage securities unit from the more profitable municipal bond insurance business. Already, similar claims have resulted in a $1.1 billion payout to Morgan Stanley.

Next up, First Solar was one of the biggest losers last week. Its stock got crushed when Germany (one of the biggest solar power markets) announced it was potentially cutting solar subsidies more rapidly than originally thought.

Travelzoo and Exact Sciences, in contrast, are showing weakness in response to no particular bad news. Travelzoo reports earnings Thursday, however, and the stock's weak showing last week may be a function of investors heading for the exits to avoid taking a larger hit. For its part, Exact Sciences' decline looks to me like investors cashing in their chips after the stock's post-upgrade run-up from the previous week.

And finally, we come to Johnson Controls.

The bull case for Johnson Controls
Last week, an earnings miss and guidance that underwhelmed cost Johnson about 10% of its market cap. For Foolish investors, though, this sounds like great news because it gives us a chance to buy the shares on sale.

CAPS member Astros13 characterizes Johnson as a "[d]iversified play on automotive sector. As things get better this high beta stock should outperform the market."

Turfscape believes that Johnson's "advanced battery division is poised for outstanding growth in conjunction with alternative fuel vehicles and alternative power systems (and power backup systems). Additionally, their building systems will benefit greatly from the increased demand for more efficient facilities."

And ContraryDude calls it a "good defensive stock" that "just raised dividend."

Indeed, today Johnson rewards its shareholders with a tidy 2.3% dividend yield on their shares. But that's not even the best part. The best part is that the shares themselves look cheap. At 13 times earnings, Johnson looks bargain-priced for the 17.4% long-term earnings growth that Wall Street expects it to produce.

Plus, some folks believe that Johnson will enjoy a pop as it returns to the mean valuation it's historically enjoyed. Over the past five years, the average P/E at Johnson has been closer to 23 than to the 13 times earnings Johnson shares fetch today.

Foolish takeaway
Now, there are caveats to this theory. For example, Johnson's currently not generating free cash flow from its business. (That's a no-no in my book.) But for Fools who believe that P/E is the better measure of a company's value, there's certainly an argument to be made that a move from 13 times earnings toward a more historically common 23-times ratio means Johnson's poised for a bounce.

Fingers crossed.

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At the time thisarticle was published The Motley Fool owns shares of First Solar, andMotley Fool newsletter serviceshave recommended buying shares of First Solar and Travelzoo, but Fool contributorRich Smithdoes not own shares of, nor is he short, any company named above.You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 339 out of more than 180,000 members.The Fool has adisclosure policy.Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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