3 Stocks Springing Back

Investors should consider buying stocks after a big decline, when pessimism has unduly beaten good companies down to great prices. That's why we here at the Fool -- and 145,000-plus investors like us -- look to the Motley Fool CAPS community to help sniff out the real opportunities from languishing companies driven by speculation.

A real bottom or another leg down?
Of course, there's no foolproof method for timing a market bottom. But CAPS has a great balance of both quantitative and qualitative resources available on 5,300 stocks, and even a nifty stock screening tool to help investors quickly zero in on potential investment opportunities. Once we've rounded up our candidates, we can use all the information in CAPS to test whether each company has already hit bottom or simply primed shareholders for further pain.

I've used the CAPS screener to filter out $100 million-plus companies that have seen their stock price appreciate by at least 15% in the past 13 weeks even while they remain less than 35% above their 52-week low.

Source: Motley Fool CAPS. Results from Oct. 30 through Jan. 25.

The bottom case
There are several reasons why Monsanto may be looking nowhere but up today. Many investors like Monsanto's dominant position as the world's largest seed company and look for growing demand for its seed technologies as farmers boost their crop yields to feed a growing world population. It has a strong revenue outlook for its pipeline over the next decade that will be driven by what it describes as a "technology explosion," and has seen strong early demand for some of its key new products that has already been boosting prepayments for seed orders. While companies like Origin Agritech (Nasdaq: SEED) look to benefit from the growing Chinese seed scene, other countries have also become open to genetically modified crops in recent years -- Monsanto has already scored approval for its corn traits in several countries including Mexico and expects approval in Korea this year.  

Many investors think Monsanto's strong portfolio of intellectual property will help keep it ahead of competitors like DuPont (NYSE: DD) and Syngenta (NYSE: SYT) at the same time the company keeps its options open to collaborating with others like Dow Chemical (NYSE: DOW) when it works to its advantage.                         

Or dead cat in disguise?
Yet even though Monsanto looks to be at the head of a burgeoning industry, there are risks in its future. The company has often faced public criticism over its business practices and is spending a considerable amount of time in court defending its intellectual property and dealing with an antitrust investigation with the Department of Justice. It recently won a ruling against DuPont, but is expected to face further legal opposition from its rival. There are market-based risks, too -- similar to fertilizer producer Mosaic (NYSE: MOS), Monsanto posted plummeting revenue and earnings in its most recent quarter. Generic competition has taken its toll on Monsanto's prized Roundup herbicide, and the company, like many competitors, is racing to bring new seeds to market to offset sagging Roundup sales. Short-term earnings could continue to face pressure while it ramps up its focus on its seeds division.                

What's your call?
Overall, 96% of the 2,845 CAPS members rating Monsanto see it outperforming the broader market. For my part, I tend to side with the bulls, based on Monsanto's strong intellectual property-based moat.

But what ultimately counts is your own opinion; CAPS is just there to help you form it. The best part is that the Motley Fool CAPS database is all free, and you can even add your own insight on any of the 5,300 stocks that our 145,000-plus members have covered.

© 2009 UCLICK L.L.C.