4 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 has 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)
Skyworks Solutions (NAS: SWKS)
Riverbed (NAS: RVBD)
Clean Energy Fuels (NAS: CLNE)
Arena Pharmaceuticals (NAS: ARNA)
Four super falls -- one superball
Judging solely from the Dow Jones Industrial Average's closing price Friday -- down only 0.1% from its pre-Sandy close -- you might think last week was pretty uneventful on Wall Street. It wasn't. In addition to the obvious happenings (Superstorm Sandy itself), last week also featured declines in the share prices of more than 2,000 stocks. So what went wrong?
Focusing on some of the week's biggest losers, we begin with Arena Pharmaceuticals -- down 8% in an abbreviated trading week. Both Arena and its weight-loss drugmaking rival VIVUS report earnings on Tuesday. But while Vivus's Qsymia drug has been disapproved in Europe, Arena still has a chance at winning approval. This hope has helped propel Arena shares up more than fivefold over the past year. So investors seem to be thinking: Why risk letting a weak earnings report this week hurt those gains? Why not take some profit now, and maybe get back in again after the news event is over?
Fact is, you don't even need a bad earnings report to hurt a stock's price. Take Clean Energy Fuels, for example. Last week, a downgrade from Piper Jaffray was all it took to lop 7% off the stock's share price. Downgrades also played a role in Riverbed Technology's 20% sell-off last week, when Wall Street declared itself underwhelmed with the company's plan to buy OPNET Technologies for $1 billion.
Tellingly, most investors on CAPS continue to have faith in both Riverbed and Clean Energy. Ignoring the analyst downgrades, our members are still giving both stocks respectable four-star ratings on CAPS. But as it turns out, there's one stock they like even better ...
The bull case for Skyworks Solutions
Skyworks shares came crashing down to Earth Friday, losing 17% of their value after the company reported fiscal Q4 and full-year earnings that exceeded expectations, but apparently not by as much as investors had hoped they would. Management's failure to boost guidance for the current quarter didn't help matters any.
Yet even so, a lot of investors have faith that Skyworks will pull out of its dive. CAPS member rcjansen calls Skyworks "the leader in providing chips for the mobile phone and tablet market." And lordmorgul sees "accelerating demand for mobile chips" in the years to come.
Of course, GridIronMac makes the familiar argument that right here, right now, iPhone 5 is good news for anyone who plays a part in building the phone's innards -- and thinks Skyworks has real "potential in short term with boost from iPhone 5."
As for the present day, of course, the stock looks neither frightfully expensive nor excessively cheap. Priced at 19 times earnings, and a price-to-free cash flow ratio that's even a bit higher than that, Skyworks needs to produce more than just the 15% long-term earnings growth that Wall Street expects from it, if it's to enjoy a truly big bounce. But it's not seriously overvalued, and it sells for a significant discount to rival TriQuint Semiconductor (NAS: TQNT) , for example.
In short, if you're looking for a good semiconductor play to ride on Apple's coattails, Skyworks is probably a good place to start. Maybe ... just wait for it to get a bit cheaper before buying in.
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The article 4 Superball Stocks originally appeared on Fool.com.Fool contributor Rich Smith does not own, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 282 out of more than 180,000 members.The Motley Fool owns shares of Apple, Clean Energy Fuels, Riverbed Technology, and TriQuint Semiconductor. Motley Fool newsletter services recommend Apple, Clean Energy Fuels, and Riverbed Technology. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.