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The stocks featured in this article are for investors who are willing to take on some risk. In terms of fundamentals, the picture does not look that bright. These stocks were picked from the bottom 100 and from a contrarian point of view could make for an interesting investment. History illustrates that even the worst of stocks can mount pretty strong rallies. Usually these rallies do not last, but they can be strong enough to produce some rather handsome returns. Investors not willing to take on risk would be better off looking at other plays. These stocks are only for those who are willing to take on risk and understand that some of these plays could trade significantly lower.

The following factors should be viewed as small positive developments if present in any of the suggested plays.

The rate at which net income is dropping is slowing down.

The rate at which cash flow per share is dropping is slowing down.

Sales for the past three year are trending upwards.

Projected 3-5 year EPS growth is in 10%-15% ranges.

A current ratio above 2.5 0

A quick ratio of 2.00

Bonus factors

Volume spike on an up day - this is usually a sign of accumulation and maybe close to putting in a bottom.

Insider buying - it is always a good sign of a turnaround, especially if the stock is beaten down.

Book value - trading below book value is another small positive sign as it at least indicates you are not over paying for the stock.

Company: Alpha Natural resources (ANR)

Basic overview

  1. Percentage held by Institutions = 79%
  2. Levered free cash flow of $454 million
  3. Operating margin= 6%
  4. Quarterly revenue growth rate = 71%
  5. Beta = 2.69

Growth

  1. Net Income ($mil) 12/2011 = -677
  2. Net Income ($mil) 12/2010 = 96
  3. Net Income ($mil) 12/2009 = 58
  1. EBITDA ($mil) 12/2011 = 899
  2. EBITDA ($mil) 12/2010 = 809
  3. EBITDA ($mil) 12/2009 = 526
  4. Net Income Reported Quarterly ($mil) = -29
  1. Cash Flow ($/share) 12/2011 = 8.01
  2. Cash Flow ($/share) 12/2010 = 7.46
  3. Cash Flow ($/share) 12/2009 = 4.91
  1. Sales ($mil) 12/2011 = 7109
  2. Sales ($mil) 12/2010 = 3917
  3. Sales ($mil) 12/2009 = 2496
  1. Annual EPS before NRI 12/2007 = 0.45
  2. Annual EPS before NRI 12/2008 = 2.63
  3. Annual EPS before NRI 12/2009 = 1.98
  4. Annual EPS before NRI 12/2010 = 2.17
  5. Annual EPS before NRI 12/2011 = 1.57

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 5
  2. 5 Year History EPS Growth 12/2011 = 23.94
  3. ROE 5 Year Average 12/2011 = 12.81
  4. Current Ratio 12/2011 = 1.47
  5. Current Ratio 5 Year Average = 2.38
  6. Quick Ratio = 1.13
  7. Cash Ratio = 0.76
  8. Interest Coverage Quarterly = N/A
  9. Book Value Quarterly = 33.72

Notes

It is trading $23.66 below book value and sports a strong quarterly revenue growth of 71%. Short percentage of float stands at 9.00%. This play is the strongest out of the pack and appears to be putting in a bottom. The coal sector has taken a beating and from a contrarian perspective it's a good time to open up positions in this sector.

Company: RadioShack Corp (RSH)

Basic overview

  1. Percentage held by Institutions = 100%
  2. Levered free cash flow of $83 million
  3. Operating margin = 2. 6%
  4. Quarterly revenue growth rate = - 0.9%
  5. Beta = 0.95

Growth

  1. Net Income ($mil) 12/2011 = 72
  2. Net Income ($mil) 12/2010 = 206
  3. Net Income ($mil) 12/2009 = 205
  1. EBITDA ($mil) 12/2011 = 253
  2. EBITDA ($mil) 12/2010 = 452
  3. EBITDA ($mil) 12/2009 = 465
  4. Net Income Reported Quarterly ($mil) = -8
  1. Cash Flow ($/share) 12/2011 = 1.98
  2. Cash Flow ($/share) 12/2010 = 2.68
  3. Cash Flow ($/share) 12/2009 = 2.49
  1. Sales ($mil) 12/2011 = 4378
  2. Sales ($mil) 12/2010 = 4473
  3. Sales ($mil) 12/2009 = 4276
  1. Annual EPS before NRI 12/2007 = 1.74
  2. Annual EPS before NRI 12/2008 = 1.52
  3. Annual EPS before NRI 12/2009 = 1.63
  4. Annual EPS before NRI 12/2010 = 1.68
  5. Annual EPS before NRI 12/2011 = 0.95

Dividend history

  1. Dividend Yield = 10.9%
  2. Dividend Yield 5 Year Average 12/2011 = 1.86
  3. Dividend 5 year Growth = 13%

Dividend sustainability

  1. Payout Ratio = 223%

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 2.7
  2. 5 Year History EPS Growth 12/2011 = -9.06
  3. ROE 5 Year Average 12/2011 = 22.09
  4. Current Ratio 12/2011 = 3.22
  5. Current Ratio 5 Year Average = 2.75
  6. Quick Ratio = 1.61
  7. Cash Ratio = 1.07
  8. Interest Coverage Quarterly = 0.18
  9. Book Value Quarterly = 7.44

Notes

It is trading $3.10 below book value. Short percentage of float is 34%.

Company: James River Coal Co. (JRCC)

Basic overview

  1. Percentage held by Institutions = 70.8%
  2. Levered free cash flow of = - $51.6 million
  3. Operating margin = 1.94%
  4. Quarterly revenue growth rate = 83%
  5. Beta = 3.06

Growth

  1. Net Income ($mil) 12/2011 = -39
  2. Net Income ($mil) 12/2010 = 78
  3. Net Income ($mil) 12/2009 = 51
  1. EBITDA ($mil) 12/2011 = 154
  2. EBITDA ($mil) 12/2010 = 160
  3. EBITDA ($mil) 12/2009 = 137
  4. Net Income Reported Quarterly ($mil) = -16
  1. Cash Flow ($/share) 12/2011 = 3.42
  2. Cash Flow ($/share) 12/2010 = 5.54
  3. Cash Flow ($/share) 12/2009 = 4.29
  1. Sales ($mil) 12/2011 = 1178
  2. Sales ($mil) 12/2010 = 701
  3. Sales ($mil) 12/2009 = 682
  1. Annual EPS before NRI 12/2007 = -3.66
  2. Annual EPS before NRI 12/2008 = -3.92
  3. Annual EPS before NRI 12/2009 = 1.85
  4. Annual EPS before NRI 12/2010 = 2.82
  5. Annual EPS before NRI 12/2011 = -0.19

Performance

  1. ROE 5 Year Average 12/2011 = -23.15
  2. Current Ratio 12/2011 = 2.64
  3. Current Ratio 5 Year Average = 2.08
  4. Quick Ratio = 1.92
  5. Cash Ratio = 1.29
  6. Interest Coverage Quarterly = 0.66
  7. Book Value Quarterly = 11.05
  8. Price/ Book = 0.37
  9. Price/ Cash Flow = 1.15
  10. Price/ Sales = 0.11
  11. EV/EBITDA 12 Mo = 3.62

Notes

It is trading almost $9 below book value. Short percentage of float stands at a whopping 50%.

Conclusion

These are not stocks one should consider holding for the long run, unless the fundamentals and or the technical picture changes considerably. One company that has the potential to mount a turnaround is Alpha Natural Resources as it is already showing some small signs of improvement. Quarterly revenue growth rate came in at 71%. In general though, when one is dealing with such stocks the best option is to bank the profits if they happen to take off. Investors who are not interested in these plays might find this article to be of interest: Duke Energy Corp: A Good Long-Term Investment?

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies - let the buyer beware.

Source: Alpha Natural Resources 1 Of 3 Candidates Trading Below Book

Additional disclosure: EPS and Price vs. industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com.