Three Stocks That Look Ready to Snap Back

Look past the short-term gyrations and you'll see an amazing symmetry underlying the stock market. After a major selloff, for example, the magnitude of the rebound mirrors the decline. A baby bear market begets a baby bounce -- the ho-hum 25% drop in 1966 was followed by a comparable rebound. And vice versa: the Great Depression was followed by a whopper of a rally -- a 109% rally in just 12 months, beginning in 1932, launching a 372% mega-bull market that ended in 1937.

The same dynamic is at work, generally, at the individual stock level. Kellogg (K - commentary - Cramer's Take) didn't get scuffed in the mega-bear market. So it's reasonable to expect it will be a big, fat snore in the retracement phase.

On the other hand, scores of stocks have been pulverized to levels so low that, well, you need a damn magnifying glass to see their stock quote. I recommended such a stock a couple of weeks ago at - gulp -- 63 cents per share: IDT Corporation (IDT - commentary - Cramer's Take). Down from $9.50 less than a year ago, the company is trading at one-half of its net cash and three times annual free cash flow. If it retraces half of its decline from $9.50, it'll generate the type of return that makes your knees buckle.

If you got hammered during the market panic, you're not going to be happy owning wet-noodle stocks such as the cereal companies. You want bounce. The best way to find it is by sifting through stocks that have been crushed by 80% or more. To be sure, some stocks deserved to get punished. But others didn't. Here are a few companies that didn't deserve it:

Office Depot (ODP - commentary - Cramer's Take): If you want to prove the market is goofy, here's your case study. This is technology bubble stuff all over again -- only this time it's upside-down. Excess goes both ways, you know (symmetry).

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At time of publication, Alsin and/or ACM was long ODP and LM, although holdings can change at any time.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider IDT to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Arne Alsin is the founder and principal of Alsin Capital Management, a California-based investment adviser. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Alsin appreciates your feedback; click here to send him an email.