These 2 Stocks Were Left Behind


The market once again chose to put its blinders on yesterday to the chaos unfolding in Europe. Since Greece hasn't left the eurozone yet and sovereign nations were all still standing, it was risk-off time and the Dow was off to the races, jumping 135 points, or 1.1%. But some companies turned tail and still fell hard, so first let's see whether they had good reason to drop. Sometimes, panic-fueled declines can make excellent buying opportunities.

Green shoots again?
The National Association of Realtors says existing-home sales rose 3.4% in April and 10% higher than a year ago while available listed inventory is down almost 21% from last year. And the huge "shadow inventory" of foreclosed homes sitting in the wings, waiting to pummel prices has yet to break upon market. The number of foreclosures actually fell to a five-year low as banks sought other remedies to foreclosure. Everyone's whistling past the graveyard hoping things improve enough to get past the next leg down.

The better conditions are evident in the quarterly results of do-it-yourself specialist Lowe's (NYS: LOW) , which saw profits jump 17%, but management's not certain that kind of growth can stick, and it lowered full-year forecasts, sending its shares down 10%. It suggested that warmer weather had people willing to spend more rather than any great recovery in housing, and with business trailing off toward the end of the quarter, it was reining in expectations.

While the market sent Lowe's lower, it shouldn't have been surprised, really, considering Home Depot (NYS: HD) had just reported earnings a couple of days ago that missed Wall Street's revenue estimates. But Big Orange's results were better than Lowe's -- Home Depot's earnings were 28% higher than last year -- so analysts fear Lowe's is losing out and have downgraded the stock.

CAPS member RScottK26 admits the remainder of the year is uncertain for Lowe's but the longer-term prospects remain encouraging.

Will see growth as housing recovers, but also as investors and landlords improve apartments and rental homes. Almost all foreclosures need work done after purchasing. Also, possible Canadian expansion interesting. I don't know about the next 6 to 12 months, but 5 years out I have to think this stock is way up.

I'd have to agree and am marking the home-repair leader to outperform on CAPS, but add Lowe's to your Watchlist and then tell us on the Lowe's CAPS page or in the comments section below if you'd like to build a future with the stock.

Friends without benefits
It's hard to see why anyone thought the Facebook (NYS: FB) IPO would be a success, other than the hype that was surrounding it. Particularly when the social networking site started plowing more shares into the offering from insiders who looked like they were trying to bail out, it should've indicated that there might not be staying power. The only thing this social media-stock has done is gone down, and a lot of investors who bought in at the IPO price of $38 a share are none too happy about it.

The problem is Facebook might not be able to live up to expectations. It's coming to light now that during the pre-IPO roadshow, even its lead underwriter, Morgan Stanley (NYS: MS) . cut its revenue forecasts while Goldman Sachs and JPMorgan Chase revised their estimates as well. Given the hype, the rewrite, and now the share-price retrenchment, there's an air that Facebook at even $30 a share is overvalued.

Indeed, highly rated CAPS All-Star weiwentg says there is a value to the company and that investors will find its stock attractive again, though for him it would have to drop by at least another third before he'd consider buying.

My take is that ideally, owners of private companies conducting IPOs are selling to maximize their own revenue. After all, that's what I'd do. And they succeeded. And if the share price is falling, then too bad for the suckers who bought. My other take is that I'd buy Facebook around $20. Not a large position, but I'd buy.

With Facebook under pressure, though, it's going to be tough selling Zynga (NAS: ZNGA) , which is heavily dependent on Facebook for its revenues. Previously I rated the social-networking site to underperform the market on CAPS, and I don't plan on changing that outlook, but I'm going to add Zynga now, too. Flame me in the comments section below or say why on the Facebook CAPS page you'd want to friend this stock. Then add the stock to the Fool's free portfolio tracker to see whether it can grow into the hype that launched it.

Ready for a resurrection
These stocks might be in turmoil, but there's one tech stock The Motley Fool thinks will profit from the next technological revolution. Get "The Only Stock You Need to Profit From the NEW Technology Revolution" to find out who's breaking all the rules to become the one to make the rules. This is a special free report that you can access right now simply by clicking here -- it's free.

At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of JPMorgan Chase.Motley Fool newsletter serviceshave recommended buying shares of Goldman Sachs and Home Depot and writing covered calls on Lowe's Companies. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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