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The stocks featured in this article are speculative stocks. In other words, you should use your Las Vegas money only. In terms of fundamentals, they look terrible in every sense of the word; these stocks were picked from the bottom 100. One could almost say this is a form of dumpster diving. Why would we even bother to look at any of these plays? Well history illustrates that even the worst of stocks can mount pretty strong rallies; usually these rallies do not last, but they are strong enough to produce some rather handsome returns. Investors, who are risk averse or looking for strong candidates, should stop and move on right now. These stocks are only for those who are willing to take on risk and understand that some of these plays could potentially drop to zero.

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 years are trending upwards.

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

A current ratio above 2.5

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.

Out of the all the plays listed below the ones in the coal sector have a greater chance of proving to be winners for those willing to take the risk. Overseas demand for coal is robust and emerging countries continue to build new coal-fired power plants. The power outage in India revealed that many of the power plants there could be working below capacity because they have inadequate supplies of coal on hand. Thus despite the outcry against coal in the West, it will be a long time before China, India and other emerging nations abandon coal.

Last year, the U.S. exported 40 million tonnes of coal and by 2015, it is estimated that amount will hit 56 million tonnes. Any slack in demand back home can easily be compensated by the 750 million-plus ton market for coal that exists outside the U.S.

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. Operating cash flow = 145M
  5. Quarterly revenue growth rate = 83.95%
  6. 52 week change = -85.2%
  7. Beta = 2.96
  8. 5 year sales growth rate = 16.5%
  9. Sales vs 1 year ago = 68.00
  10. Short percentage of float = 32%
  11. Book value = 11.05

Growth

  1. Net Income ($mil) 12/2011 = -39
  2. Net Income ($mil) 12/2010 = 78
  3. Net Income ($mil) 12/2009 = 51
  4. EBITDA ($mil) 12/2011 = 154
  5. EBITDA ($mil) 12/2010 = 160
  6. EBITDA ($mil) 12/2009 = 137
  7. Net Income Reported Quarterly ($mil) = -16
  8. Cash Flow ($/share) 12/2011 = 3.42
  9. Cash Flow ($/share) 12/2010 = 5.54
  10. Cash Flow ($/share) 12/2009 = 4.29
  11. Sales ($mil) 12/2011 = 1178
  12. Sales ($mil) 12/2010 = 701
  13. Sales ($mil) 12/2009 = 682
  14. Annual EPS before NRI 12/2007 = -3.66
  15. Annual EPS before NRI 12/2008 = -3.92
  16. Annual EPS before NRI 12/2009 = 1.85
  17. Annual EPS before NRI 12/2010 = 2.82
  18. 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

Notes

Sports a decent 5 year sales growth rate of 16.5% and it has a strong quarterly revenue growth rate of 83.95%. The short percentage of float is rather high at 32% making it a good candidate for a short squeeze. It is also trading roughly $6.50 below book.

Company: Complete Genomics, Inc. (NASDAQ:GNOM)

Brief overview

  1. Operating margins = - 467%
  2. Quarterly earnings growth rate= - 42.8%
  3. 52 week change = -74%
  4. Short percentage of float = 8.5%
  5. Sales vs 1 year ago = 106%
  6. Sales vs 1 quarter ago = - 42%
  7. Operating cash flow = - 56M
  8. Levered free cash flow = - 49M

Growth

  1. Net Income ($mil) 12/2011 = -72
  2. Net Income ($mil) 12/2010 = -58
  3. Net Income ($mil) 12/2009 = -36
  4. Net Income Reported Quarterly ($mil) = -20
  5. EBITDA ($mil) 12/2011 = -58
  6. EBITDA ($mil) 12/2010 = -46
  7. EBITDA ($mil) 12/2009 = -27
  8. Cash Flow ($/share) 12/2011 = -1.83
  9. Cash Flow ($/share) 12/2010 = -0.38
  10. Sales ($mil) 12/2011 = 19
  11. Sales ($mil) 12/2010 = 9
  12. Sales ($mil) 12/2009 = 1
  13. Annual EPS before NRI 12/2010 = -4.38
  14. Annual EPS before NRI 12/2011 = -2.4

Performance

  1. Return on Investment = -66.18
  2. Current Ratio = 1.7
  3. Current Ratio 5 Year Average = 3.04
  4. Quick Ratio = 1.5

Notes

While all the plays are speculative in nature this play would fall under the extremely speculative category.

Company: MEMC Electronic Materials Inc. (WFR)

Basic overview

  1. Operating margins = - 3.77%
  2. Quarterly earnings growth rate= - 29.4%
  3. 52 week change = -69%
  4. Beta = 2.15
  5. Short percentage of float = 14%
  6. Sales vs 1 year ago = 21.3%
  7. Sales vs 1 quarter ago = -29%
  8. 5 year sales growth = 7.53%
  9. Operating cash flow = - 176M
  10. Levered free cash flow = - 731M
  11. Book value = 2.81
  12. Long term debt to equity ratio = 2.94

Growth

  1. Net Income ($mil) 12/2011 = -1536
  2. Net Income ($mil) 12/2010 = 34
  3. Net Income ($mil) 12/2009 = -68
  4. Net Income Reported Quarterly ($mil) = -92
  5. EBITDA ($mil) 12/2011 = -639
  6. EBITDA ($mil) 12/2010 = 181
  7. EBITDA ($mil) 12/2009 = 28
  8. Cash Flow ($/share) 12/2011 = 3.22
  9. Cash Flow ($/share) 12/2010 = 1.12
  10. Cash Flow ($/share) 12/2009 = 0.44
  11. Sales ($mil) 12/2011 = 2716
  12. Sales ($mil) 12/2010 = 2239
  13. Sales ($mil) 12/2009 = 1164
  14. Annual EPS before NRI 12/2007 = 3.38
  15. Annual EPS before NRI 12/2008 = 3.24
  16. Annual EPS before NRI 12/2009 = -0.11
  17. Annual EPS before NRI 12/2010 = 0.39
  18. Annual EPS before NRI 12/2011 = 0.32

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 15
  2. 5 Year History EPS Growth = -48.38
  3. ROE 5 Year Average = 18.98
  4. Return on Investment = -0.24
  5. Current Ratio = 1.28
  6. Current Ratio 5 Year Average = 2.61
  7. Quick Ratio = 1.09
  8. Cash Ratio = 0.95

Notes

Short percentage of float increased from 10.9% to 14.2% in less than 30 days. This is another play that falls under the "extremely speculative category."

Company: Alpha Natural Resources (NYSE:ANR)

Basic overview

  1. Percentage held by Institutions = 79.9%
  2. Levered free cash flow = $454M
  3. Operating cash flow = $684M
  4. Operating margin= 6%
  5. Profit margin = - 9.7%
  6. Quarterly revenue growth rate = 71%
  7. Beta = 2.61
  8. Short percentage of float = 11.8%
  9. 5 year sales growth rate = 30.4%
  10. 5 year capital spending growth rate = 44.2%
  11. Sales vs 1 year ago = 81.5%
  12. Long term debt to equity ratio - 0.39

Growth

  1. Net Income ($mil) 12/2011 = -677
  2. Net Income ($mil) 12/2010 = 96
  3. Net Income ($mil) 12/2009 = 58
  4. EBITDA ($mil) 12/2011 = 899
  5. EBITDA ($mil) 12/2010 = 809
  6. EBITDA ($mil) 12/2009 = 526
  7. Net Income Reported Quarterly ($mil) = -29
  8. Cash Flow ($/share) 12/2011 = 8.01
  9. Cash Flow ($/share) 12/2010 = 7.46
  10. Cash Flow ($/share) 12/2009 = 4.91
  11. Sales ($mil) 12/2011 = 7109
  12. Sales ($mil) 12/2010 = 3917
  13. Sales ($mil) 12/2009 = 2496
  14. Annual EPS before NRI 12/2007 = 0.45
  15. Annual EPS before NRI 12/2008 = 2.63
  16. Annual EPS before NRI 12/2009 = 1.98
  17. Annual EPS before NRI 12/2010 = 2.17
  18. 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. Book Value Quarterly = 33.72

Notes

  1. A strong quarterly revenue growth rate of 71%
  2. It is trading $26.69 below book value.
  3. Short percentage of float has increased from 9% in June to almost 12% in July.

It is trading at new 10 years lows currently. Investors should wait until it puts in a nice base formation before jumping in. A weekly close above 9 would turn the outlook to bullish.

Company: Arch Coal Inc (NYSE:ACI)

Basic overview

  1. Percentage held by Institutions = 79%
  2. Operating margin= 7.25%
  3. 5 year sales growth rate = 12.9%
  4. 52 week change = - 69.5
  5. 5 year EPS growth rate = -18.4%
  6. 5 year Capital spending growth rate = 26.71%
  7. Quarterly revenue growth rate = 7.9
  8. Operating cash flow = $ 423
  9. Levered free cash flow = 162M
  10. Beta = 2.26
  11. Sales vs 1 year ago = 35.4%
  12. Sales vs 1 quarter ago = 8.00
  13. Long term debt to equity ratio = 1.2
  14. Short percentage of float = 31%

Growth

  1. Net Income ($mil) 12/2011 = 142
  2. Net Income ($mil) 12/2010 = 159
  3. Net Income ($mil) 12/2009 = 42
  4. EBITDA ($mil) 12/2011 = 824
  5. EBITDA ($mil) 12/2010 = 731
  6. EBITDA ($mil) 12/2009 = 459
  7. Net Income Reported Quarterly ($mil) = 1.2
  8. Cash Flow ($/share) 12/2011 = 3.14
  9. Cash Flow ($/share) 12/2010 = 3.67
  10. Cash Flow ($/share) 12/2009 = 2.41
  11. Sales ($mil) 12/2011 = 4286
  12. Sales ($mil) 12/2010 = 3186
  13. Sales ($mil) 12/2009 = 2576
  14. Annual EPS before NRI 12/2007 = 1.21
  15. Annual EPS before NRI 12/2008 = 2.45
  16. Annual EPS before NRI 12/2009 = 0.42
  17. Annual EPS before NRI 12/2010 = 1.14
  18. Annual EPS before NRI 12/2011 = 1.07

Dividend history

  1. Dividend Yield = 1.9
  2. Dividend Yield 5 Year Average = 1.7
  3. Dividend 5 year Growth = 11.6

Dividend sustainability

  1. Payout Ratio = 0.57
  2. Payout Ratio 5 Year Average = 0.4

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 11.8
  2. 5 Year History EPS Growth = -11.8
  3. ROE 5 Year Average = 10.76
  4. Current Ratio = 1.55
  5. Current Ratio 5 Year Average = 1.27
  6. Quick Ratio = 0.79
  7. Cash Ratio = 0.33
  8. Interest Coverage Quarterly = 0.74

Notes

The short percentage of float which stood at 19% on the 10th of the month has now soared to 31%.

Conclusion

In general if you like a company but find that the stock is trading above your entry point, then you should consider selling puts at strikes you would not mind owning the stock at. The benefit of this strategy is that it allows you to get into at a predetermined price or get paid for trying to. When you put in a limit order, you do not get paid for your efforts if the stock does not trade down to your entry price. As the markets are volatile and overbought, investors should tread with caution. The ideal situation would be to wait for a much stronger decline before deploying committing large amounts of money to any given play.

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. Earnings estimates sourced from dailyfinance.com.

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: 5 Speculative Plays To Consider