This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Rating Cut, Stock Slump Trigger 'Buy' Signal

Stocks in this article: RCII AKAM VPRT RCL MS GES

BOSTON ( TheStreet) -- Standard & Poor's downgraded America's triple-A credit rating for the first time Friday, almost a trillion dollars was wiped off the benchmark S&P 500 Index of U.S. stocks this week and a key jobs report confirmed the economy is limp.

With stocks having strongly rebounded from the March 2009 low and the Federal Reserve predicting accelerating economic growth in the second half of this year, expectations had been high just a few months ago. Instead, stocks are now down 10% from this year's peak -- producing the first correction in more than two years -- throttled by Thursday's 500-point-plus nose dive in the Dow Jones Industrial Average that did as much emotional damage as financial.

Sure, the news is grim. But it would be foolhardy not to take a step back and see if there are any opportunities in the stock market. After all, money is made by buying low and selling high. And even though confidence in Fed chief Ben Bernanke, President Barack Obama and Congress is shaken, chief market strategists at 13 big banks forecast the S&P 500 will rise 17% through Dec. 31, the average estimate in a Bloomberg survey taken Friday.

So let's step away from the scary R-word -- recession -- for a minute and assess the damage that has been done. I screened stocks over the past 10 days that have fallen more than 10% and may have been unfairly punished. Here are at least four companies that are worth another look:

1. Royal Caribbean Cruises (RCL): The cruise operator's stock is down 25% over the past 10 days and fell 14% last week after the company lowered its 2011 guidance by about 20 cents to a range of $2.85 to $2.95.

Royal Caribbean blamed the shortfall on lower expectations for Eastern Mediterranean sailings and an interest expense revision.

At the midrange of guidance, the stock is now trading at just 9.3 times earnings, much lower than the five-year average of 17 times earnings. Sure, if we double dip and fall into another recession, the company will likely face tough times. But at these levels, I would consider it a low-risk, high-reward investment.

2. Rent-A-Center (RCII): The rent-to-own operator has fallen 21% over the past 10 days. The stock was downgraded last week by Stifel Nicolaus after the company missed expectations and lowered guidance. Management expects $2.85 to $3 a share in earnings, on $2.87 billion to $2.91 billion in revenue. Previously, executives forecast $2.90 to $3.10 a share.

At the midrange of guidance, the stock is now trading at only 8.3 times earnings, much lower than competitor Aaron's (AAN), which trades for 14 times earnings. Aaron's has outperformed Rent-A-Center, but with the recent drop in price, Rent-A-Center looks attractive. And if the economy continues to deteriorate, this is the kind of company that's recession-resilient.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs