Can These Stocks Bounce Back?
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 173 stocks listed under "telecommunications" 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
52-Wk Price Change
5-Yr. Growth Rate
|Qualcomm (NAS: QCOM)|
|Sonus Networks (NAS: SONS)|
|Tellabs (NAS: TLAB)|
Source: Motley Fool CAPS; Yahoo! Finance
International and financial worries are again gripping the market. All the gains made this year have been wiped out and markets sit below where they started 2011. But with the S&P 500 still up 6% over the last 12 months, it might be surprising to learn that CAPS telecommunications stocks have done slightly better, rising more than 7% during that same span of time. 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
The shakeout in the wireless and mobile computing market is producing some surprising results as the tech sector realigns itself in one of the industry's most critical upheavals. Hewlett-Packard's decision to abandon its WebOS technology and essentially exit the hardware market for tablets and mobile phones makes it only the latest big loser, even as it concedes Apple is one of the industry's biggest winners. HP basically says it can't compete against the iPhone and iPad.
InterDigital (NAS: IDCC) was also a winner, despite delaying until September the sale of some of the patents in its 8,000-strong portfolio. With Nortel's patents going for $4.5 billion and Motorola Mobility (NYS: MMI) getting purchased by Google for $12.5 billion, its patent-rich portfolio will likely bring in a pretty penny for investors.
Qualcomm is among a list of companies said to be eyeing InterDigital's patents, but with a deep portfolio of its own would it want or need to pay the high premiums the patents now carry? Since it's already battling InterDigital for LTE/4G patent supremacy (depending on who's doing the counting, one or the other tech specialist has more market share than the other), it may be forced to make a bid if only to keep someone else from gaining on it. If nothing else, CAPS member FreeFlyingFool says Qualcomm occupies an enviable position in the industry: Qualcomm holds a place on increasing relevance as more and more computing goes mobile. The company's valuation is reasonable given its position and the dividend's even a nice kicker.
Let us know on the Qualcomm CAPS page if the wireless leader will make a bold move on InterDigital or if it's own portfolio will soon be eyed by a deep-pockets buyer.
Despite Sonus Networks' big revenue miss earlier this month, when it reported second quarter earnings, the fact that it's keeping its full-year guidance intact suggests it was just an order timing issue. AT&T and CenturyLink (NYS: CTL) are two of Sonus' biggest customers, so when they shuffle orders around, it can create gaps like we saw this quarter.
There is some fear the telecom industry will experience a slowdown this year, and the shifting of orders may represent slack demand, and thus deeper problems. Acme Packet (NAS: APKT) and Broadsoft have both gyrated to the conflicting signals the market's been giving off.
Verizon is also dragging its feet, stalling the rollout of its FiOS network to new areas (though growing like gangbusters in places already targeted for installation), which is impacting the whole industry. Tellabs has been forced to cut costs to the bone, and Cisco decided its best course of action was to focus its energy again on the business it knows best. In short, networking sector winners have been few and far between.
Yet 98% of the CAPS All Stars weighing in on Tellabs think it can bounce back from here, with only a slightly smaller percentage thinking Sonus will do the same.
Sonus' discounted price had some hopeful that Cisco might find its assets a good wedge to use against Acme or Tellabs, but management re-upped the poison pill defense that makes it unlikely someone will want to move in and make an acquisition.
Let us know on the Sonus Networks' CAPS page if you think it can rise above the morass that is the networking sector today. You can also keep track of Tellabs' developments by adding the stock to your watchlist.
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 bounce higher.
At the time this article was published The Motley Fool owns shares of Google and Apple. The Fool owns shares of and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Google, InterDigital, Apple, AT&T, Cisco, and Acme Packet. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. 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.Fool contributor Rich Duprey owns shares of Cisco but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here.
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