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-member Motley Fool CAPS community, we'll see whether any of them have the potential to bounce back.
It's been awhile, 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:
|Omnivision Technologies (NAS: OVTI)||(66%)||$12.71||*****|
|DryShips (NAS: DRYS)||(69%)||$2.02||***|
|Sirius XM Radio (NAS: SIRI)||(41%)||$1.45||**|
|Dendreon (NAS: DNDN)||(82%)||$8.08||**|
|Las Vegas Sands (NYS: LVS)||(34%)||$36.71||**|
Companies are selected by screening on finviz.com for abrupt 10% or greater price drops over the past week. 52-week high and recent price data provided by finviz.com. CAPS ratings from Motley Fool CAPS.
Five super falls -- one superball
Last week wasn't a great one for stocks, as more than 1,000 of Wall Street's best and brightest saw new 52-week lows. (This week isn't starting off so hot, either.) In the chart above, you see five of the week's worst performers -- each of which was literally decimated, losing 10% or more of its market cap.
So what went wrong? In Las Vegas Sands' case, it was big trouble in little China -- Macau, to be specific. A third straight month of bad manufacturing numbers on the mainland, combined with rumors of a credit crunch among gambling "junket" tour operators to Macau, has investors wondering whether the casino operator's revenues (and those of rivals Wynn (NAS: WYNN) and MGM (NYS: MGM) ) are about to take a hit. Meanwhile, at Dendreon, the blame lies mainly with the lawyers who have begun filing class action lawsuits.
In contrast, it's hard to pin a specific cause for the sell-offs on either Sirius XM or DryShips. No particular stock-specific news seems to have emerged last week. The stocks are just weak. And neither one is particularly popular on CAPS. It could be this very unpopularity is part of the reason the stock prices are suffering.
The good news is that not all of these stocks are loathed on CAPS. To the contrary, one of the cheapest stocks on the market today also enjoys very high marks from CAPS members: Omnivision Technologies.
All-Star investor SreeRama calls Omnivision a "well run company (still run by the founding team)" with a "great balance sheet," and a "technology leader in their category with demand outpacing supply. The shift from desktop/laptop/notebook devices to smart phones and tablets has more than doubled the usage/need (mobile devices needing both front and back facing cameras unlike the desktops/laptops)."
Fellow ace investor EnigmaDude points out that "earnings more than doubled for the July period, but the company predicted earnings to come in the range of 52-64 cents a share ... for the current period. OK, so if they "only" earn $0.50 in Q3 that would give them a forward P/E of about 6 or so." Cheap, in other words.
But perhaps the No. 1 reason Fools love Omnivision is the firm conviction that the company's camera technology will be incorporated into the new iPhone 5. CAPS All-Star philippalmer puts it bluntly: "I would almost bet a paycheck they will be the sole provider for optics for the next-gen IPhone, so this one is going up!"
Thanks to its recent sell-off, an investment in Omnivision will set you back considerably less than a paycheck. At a share price of just $14 and change (after today's price spike) Omnivision still costs less than six times earnings -- both trailing earnings and forward estimates. Earnings are of very high quality, too, backed up about 99% by real free cash flow -- and giving the company a P/FCF ratio of about six as well.
Foolish final thought
Best of all, with a balance sheet brimming with cash, Omnivision's true cost is probably closer to twotimes annual free cash flow on an enterprise value basis. In other words, if Omnivision only grows at the inflation rate over the next several years, the stock's "cheap." If it grows anywhere near the 15% annual compound rate that Wall Street projects for it, Omnivision is an out-and-out, back-up-the-truck bargain.
Will Omnivision prove Fool's optimism warranted? Will its tech indeed make it into the iPhone 5? Add this stock to your Fool Watchlist, and you'll be the first to know.
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. 268 out of more than 180,000 members.The Fool has adisclosure policy.The Motley Fool owns shares of Dendreon. 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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