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 165,000-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 5,400 stocks, and even a nifty stock screening tool to help investors quickly zero in on potential investment opportunities.
I've used the CAPS screener to filter out $100 million-plus companies that have seen their stock price appreciate by at least 30% in the past 52 weeks, even while they sit at least 30% below their 52-week high.
(out of 5)
% Below 52-Week High
Skechers (NYSE: SKX)
Sonic Solutions (Nasdaq: SNIC)
Source: Motley Fool CAPS.
Sonic Solutions is looking to build its presence in the Internet TV market with its agreement to buy video software and compression company DivX. It also recently saw a big jump in its share price after narrowing its fiscal first-quarter loss. But with lots of red ink and some big competition, CAPS members still give it a one-star rating. The community is much more bullish on footwear maker Skechers, which has recently seen big sales momentum.
The bottom case
Many CAPS members have weighed in with reasons why Skechers may be looking nowhere but up today. After posting record sales in the first quarter, the company followed up with another quarter of record revenue with earnings per share that nearly doubled Wall Street's expectations. Skechers has seen strong sales across all geographies and has become one of the leaders in the toning shoes category, which aim to strengthen wearers' leg muscles as they walk.
Some investors expect the growth that Skechers has seen across all of its segments and geographies to continue, and it isn't the only company seeing improving footwear sales. Shoemakers Deckers Outdoor (Nasdaq: DECK) and Crox (Nasdaq: CROX) both posted big leaps in second-quarter sales and gave bullish outlooks for the upcoming months. On top of improvement in its domestic wholesale segment, Skechers expects more growth opportunities outside the U.S., as its brands gains more recognition globally.
Or further to fall?
Even though Skechers may be showing some spring in its step, some investors and retailers remain wary of the slowly recovering U.S. economy, the very market which accounts for a large majority of Skechers' sales. Major retailers Kohl's (NYSE: KSS) and J.C. Penney(NYSE: JCP) -- which sell Skechers among a diversity of other products -- gave cautious outlooks for the rest of the year because of the uncertain economy. And not everyone is sold on the staying power of toning shoes.
The discrepancies of their benefits has kept Nike (NYSE: NKE) from entering the toning shoe market, and has even led the company to take a stand against the shoes in a recent ad campaign. Skechers plans to contest what it's called a couple of "frivolous" lawsuits against its Shape-Ups shoes, and it's fighting back after a recent study suggested that toning shoes don't offer any of the health benefits claimed by their makers. With this hot new trend growing to become a big part of the sales at many shoemakers, some investors are concerned that this growth story may be starting to unravel.
What's your call?
Overall, about 94% of the 379 CAPS members rating Skechers believe it will outperform the broader market. For my part, I find it hard to dismiss Nike's skepticism of the new trend in toning shoes. I'd rather invest in a long-term track record at a company, not a short-term retail trend.
But ultimately, your own opinion counts most; CAPS is just there to help you form it. Best of all, the Motley Fool CAPS database is all free, and you can even add your own insight on any of the 5,400 stocks that our 165,000-plus members have covered.
© 2010 UCLICK L.L.C