9 Companies to Buy After Recent Market Tumble

by: Brian Nichols

Throughout the last month the S&P has seen a loss of nearly 11%. Almost all companies traded within major indices have seen a monthly loss of some sort. Financials and capital goods are among the worst performers while communication services have performed among the best. This downtrend was sparked by a fear of another recession similar to 2008. Therefore several stocks are now trading at levels far beneath value. The markets have been up and down over the last week with many companies retrieving some of the loss experienced during the last month. Below are several stocks that have lost in excess of 40% that I expect to see gains in the immediate future as the market recovers.

MetroPCS Communications (PCS) posted a gain on Thursday of 7%. The company has now seen a one month loss in excess of 40%. The company announced earnings below estimates in EPS and revenue. PCS stated that subscriber growth has slowed down, the third quarter may see further defections. Investors viewed the report as negative which heavily contributed to the loss seen by the company. After reviewing the stock performance, history and earnings I believe this company is a strong buy. Revenue has experienced ridiculous growth and investors expect to see the growth maintained. During this missed quarter, revenue increased by 19% year-over-year which maintains the company's current path to post significant gains in revenue year-over-year since 2006. The earnings were below estimates but the company still posted financials that were significantly better than 2010. Therefore I see the drop as not a correction but rather investors overselling a stock making it undervalued. The stock has posted a five day gain of 10%, if the market goes down and the stock drops then I would load up on several shares of MetroPCS.

Brocade Communications (NASDAQ:BRCD) posted a gain on Thursday of 6.82%. This provided a bright spot for investors who have seen a monthly loss of 44%. The loss was sparked when the company lowered Q3 guidance for revenue of $500-$505 million with EPS between 0.08 - 0.09. Analysts were expecting to see revenue of $551 million with an EPS of 0.11. The company decreased guidance by a great margin and should expect a loss but I do not believe this news alone justifies a 44% loss in total market capitalization. The company has grown at a remarkable rate with revenue posting significant gains over the last five years. Assets have increased since 2006 and debt has decreased during the same period. This company may see a decline in business and with earnings around the corner the stock could decline even more. I believe the stock goes up from here, a portion of the loss was from lowered guidance yet the other portion was felt from overall market panic. The company is a prime takeover target and is part of a strong industry. I could easily see the company's future turning very quickly and at these prices the stock has to much value not to buy.

Swift Transportation Company (SWFT) posted a gain of nearly 4% on Thursday after a month which has claimed over 40% of the company's market cap. This loss was directly related to mass selling within the market. The company has a fragile financial situation and the fear of a falling economy caused investors to sell. The company is on track to deliver its first year of positive income since 2006. SWFT released earnings which had revenue of $850.47 million, a gain of more than $110 million year-over-year. The company has now posted positive net income over the last three quarters. The most recent earnings report announced net income of $19.58 million compared to a loss of $23.08 million year-over-year. The company seems to be on the right track for profitability. Swift has created additional revenue which is reflected as quarterly gains. I see this stock continuing to grow and returning large gains over the next few years. The balance sheet is a mess, the company has a large amount of debt in comparison to assets. However the company has decreased its debt over the last five quarters.

IMAX Corporation (NYSE:IMAX) posted a gain of 10.26% after announcing the company expanded a partnership with a Singapore exhibitor. The company has still lost 42% of its value during the last month. This loss is in part due to a earnings report that missed profit expectations as a result of a poor film slate. The company announced earnings of 0.07 versus expectations of 0.20. Performance such as this should be expected as the company relies on movie slates for success. The company's long term future looks strong as the company has a record backlog of 300 theater systems along with many additional signings. During the previous quarter the company nearly doubled theater installations and now expects to install between 120-130 new systems, an increase from 115-125. These new systems should eventually provide the company with solid earnings regardless of movie slates. The company is working hard to install systems however it takes time and costs money. Since 2008 the company has been hard at work seeing revenue and net income both drastically increase. IMAX increased assets by a large margin in 2010 and has consistently decreased debt since 2008. The future looks bright, the company has nearly eliminated long term debt, and backlogs are strong. I believe this company is a buy at the current price. Any investor who buys shares at the current prices may lose during the next several months but should see large returns over the next few years.

HCA Holdings (NYSE:HCA), AmeriGROUP Corporation (AGP), Kindred Healthcare (NYSE:KND), Skilled Healthcare Group (NYSE:SKH) and Sun Healthcare Group (NASDAQ:SUNH) have all posted losses in excess of 40% during the last month. A great deal of these losses came after budget cuts were announced that impacted nursing facilities funded with Medicare. Each of the five companies have seen an increase in quarterly revenue along with, at least, three years of revenue growth. Each company is profitable and most have strong balance sheets. The cuts from the government will affect these companies but not to the level in which the loss has been experienced. I expect the companies to adjust and learn how to cut additional cost. Each company has strong revenue growth and even if the companies maintain the current levels I expect the stocks to increase as expectations are low. These companies should each offer strong returns in the near future. However the long term results are unknown as we do not know how the cuts will affect each company with certainty.

These companies all have strong fundamental performance and should see growth from current positions. Most of the loss has come as a result of panic within the markets. Investors should take advantage of the situation as these stocks are among the best in terms of upside from the current positions.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in IMAX, SWFT over the next 72 hours.