The market hasn't been too kind to most stocks lately, but a few of them have suffered more than their fair share of selling. Rather than grouse about lost ground though, investors should be using these steep selloffs as entry opportunities. Here are four badly-beaten-down names to consider, as the bullish truth should be coming to the light soon.
ARTICLE: Barking Up The Dogs Of The Dow Tree
Target Is Still on Target
Since the January 3 peak, Target Corp (NYSE:TGT) shares have lost nearly 20% of their value, mostly prodded by December's revenue shortfall. Even though the news of its Canadian expansion was well-received, it didn't actually stop the bleeding.
At some point in time though, the market has to start appreciating the fact that even with one month's sales coming up short, the cheap-chic retailer is still growing earnings, and just logged its best annual profit. The entry into Canada can only improve those numbers.
In one of the more dramatic one-day meltdowns we've seen this year, Finisar Corp. (Nasdaq:FNSR) plunged 38% on news that the current quarter's earnings would be about 30% shy of estimates because of slowing demand in China. Fair enough. As Credit Suisse's William Stein points out though, the soft patch is likely to be short-lived - bandwidth is still in short order, and should still drive customers to the company's optical connectivity hardware.
It should be no major surprise that copper mining stocks and raw copper prices ebb and flow together to some degree. In fact, it's not even a complete shock that Southern Copper Corporation (NYSE:SCCO) topped out on January 3 even though copper spot prices didn't peak until early February - stocks can lead commodities as well as lag them. What is a surprise, however, is how alarming the 20% correction has been to investors. (For related reading, see Connecting Crashes, Corrections And Capitulation.)
The selloff has less to do with the waning price of copper, and more to do with the fact that SCCO shares turned in a red-hot 86% rally over the last five months of last year, and were overbought as a result. Copper prices are only off about 7% from their peak, and remain practically in line with levels that have finally started to push Southern Copper's profits up again.
Since mid-December, Royal Caribbean Cruises (NYSE:RCL) shares have fallen 27% on a disappointing Q1 outlook despite topping Q4's earnings of 13 cents by posting an EPS of 20 cents. The pullback has priced RCL at a palatable forward-looking P/E of 12.4. What's going mostly unappreciated, however, is that Royal Caribbean has topped earnings estimates in five of the last six quarters, including the most recent one.
Just for the record, it's not like Royal Caribbean has been on target with the outlooks, for better and for worse. It was only a quarter earlier the company was expecting record earnings for 2011; what happened to that? Now that concern has turned into hysteria, we may be at the bottom. (To learn more, see Market Bottom: Are We There Yet?)
The Bottom Line
It's certainly easier to buy a stock that's on the way up rather than one that seems to be on the way down. Veteran traders know, however, that the biggest gains come from making bold - and often contrarian - moves. All four of these names are in the gutter now, but have the right stuff to hammer out rebounds soon.
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