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, by examining one specific sector of the economy in search of companies with rising CAPS ratings.
Among the 518 stocks listed under "Basic Materials" in the CAPS' screener, we've unearthed a handful with top five-star ratings. Those accolades mean that our 135,000 CAPS investors are confident that these stocks will beat the market in the months ahead:
| Company | CAPS Rating Today (out of 5) | Recent Price | 52-Week Price Change | Estimated 5-Year Growth Rate |
|---|---|---|---|---|
| Chesapeake Energy (NYSE: CHK) | ***** | $20.53 | (58%) | 8% |
| Huntsman (NYSE: HUN) | ***** | $5.60 | (60%) | 3% |
| Titanium Metals (NYSE: TIE) | ***** | $8.53 | (22%) | (5%) |
| Transocean (NYSE: RIG) | ***** | $77.67 | (42%) | 20% |
| USEC (NYSE: USU) | ***** | $5.83 | 11% | 10% |
Sources: Motley Fool CAPS; Yahoo! Finance.
In the "Basic Materials" sector, you'll find a broad range of companies spanning diverse industries, from metals and mining to energy and chemicals. It includes not only well-known industry leaders such as Huntsman and Halliburton (NYSE: HAL) but smaller, more obscure names such as Zion Oil & Gas (NYSE: ZN) and specialty chemicals maker Solutia.
Some spring in its step
One of the biggest arguments in favor of a recovery for natural-gas producers like Chesapeake Energy is that prices for natural gas remain near historically low levels. As depressed as prices are, investors believe that relief is on the horizon. CAPS member trhdawg likes both the company and the industry: "Long Term Play - Natural Gas has been at its lowest since almost 1994 (3 dollars something) , I am buying all the oil services, natural gas companies, and energy etf's and waiting on them for 6-12 months. ... Sometimes a contrarian play is what is needed."
A forward-looking mindset like that is necessary here. Natural-gas inventories remain flush, standing some 19% above the average five-year level of 2.43 trillion cubic feet. Even Halliburton, the $20 billion energy-services company, says not to expect a recovery in North American gas drilling for the remainder of 2009.
A similar cautionary stance is probably in order for both gas and oil drillers -- even deepwater companies such as Transocean and Diamond Offshore. Yet Transocean just snagged a cool, $510,000-per-day contract from Petrobras for three years' worth of work starting early next year, so there are still drilling contracts out for the taking. CAPS member bkwfool says that Transocean's top-dog position will allow it to withstand the economic malaise: "Relatively low [debt] for a driller, so should weather the economic downturn and lower oil prices. Then, poised to break out as the leading off-shore drilling rig provider."
Similarly, strong growth potential can be found in Titanium Metals, which is valued more cheaply than rival RTI International and has generated copious amounts of free cash flow over the past three quarters. Although it's given back some of its recent gains, Titanium Metal's stock has advanced by more than 35% over the past three months and has doubled off its March low. Among other things, that kind of price rebound has attracted investors such as CAPS member jscagli:
Strong financials. Department of Energy submitted a license application for a nuclear waste repository with the [Nuclear Regulatory Commission] in which the design implements a titanium drip shield that will require nearly half the world's supply. A [judgment] is expected over the next 2 to 3 years to begin construction
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