Five Big Bears Ready To Roar For June 24

Tickers in this Article: HUN, CSE, CVH, WCG, GM

If the old investing axiom "buy low, and sell high" is true, then investors should be jumping with joy when the market shows them companies that have declined more than 10% in a week! These seemingly large share-price declines are often really just small price corrections that occur as part of an overall movement in the market as a whole. For a long-term investor looking to find an entry point in an individual stock, these short-term price pullbacks are often a blessing in disguise.

A company's fundamentals need to be explored when it has seen some serious price declines over a short period of time, because a large price decline can also signal something more sinister than a lowball entry point; it could just as easily be the start of a long downtrend in the stock's price, or the beginning of the end of the company's success as a business. In other words, any time one of your stocks takes a plunge to lower price levels, you should probably ask yourself whether there is something fundamentally wrong with the underlying company. (For further reading, be sure to see our article Surviving Bear Country.)

Let's take a look at five stocks that have experienced large declines over the past week and dig a little deeper to find one with bullish potential.

The Bear Cave

Company	One Week Loss*	Community Sentiment
Huntsman (NYSE:HUN)	38.8%	100% Bullish
CapitalSource (NYSE:CSE)	26.2%	69% Bullish
Coventry Health Care (NYSE:CVH)	25.1%	100% Bullish
Wellcare Health Plans (NYSE:WCG)	23.8%	100% Bullish
General Motors (NYSE:GM)	20.5%	75% Bullish
* Data as of market close June 23, 2008

Automakers Keep Stalling
Shares of General Motors fell an average if 4.5% each of the last five days of trading this past week, with the largest losses on Friday and Monday, closing down 6.8% and 6.4% respectively. GM's shares, are down from a 52-week high of over $43, as high fuel costs continue to turn consumers away from the large trucks and SUVs, which are GM's largest money maker.

GM has seen losses of over $50 billion over the past three years, with $3.25 billion coming from this past quarter, and analysts are fearing that the second quarter will be even worse, as gas prices remain above $4 per gallon in most of the country. (For more on analyst expectations, read Analyst Forecasts Spell Disaster For Some Stocks.)

Given the larger forces at play here, it is not surprising to me that the stock has taken such a beating over the past week, or even the past year. However, what I look for in a stock that has seen better days, is the potential to come back from those dark depths; and that is what GM seems to have. Instead of sitting back and trying to "ride" through this turbulent market, GM instituted some changes this past week. Yesterday, GM announced that it will be cutting truck production by slowing assembly-line speeds, cutting shifts, and temporarily idling seven factories. On top of this, the company is raising 2009 vehicle prices by an average of 3.5%, or about $1,000 per vehicle, and is going to be offering 0% financing on trucks in an attempt to reduce inventory. GM has also enlisted the services of a third-party research firm to review its Hummer brand. The company announced earlier this month that it might sell this oversized SUV line.

The announcement of these rate hikes, has already helped the shares of this battered company - as of the time of writing, GM's shares were up more than 4% in morning trading. With management doing everything in its power to turnaround the company's future, I like the potential of GM over the longer term. There is good news on the horizon is we look to 2010, when an agreement to transfer retiree healthcare costs to an independent trust fund will occur. This agreement with the United Auto Workers should increase earnings and cash flow. It is important to note that with share prices as low as they are today, GM's dividend yield has increased to over 7%! This is not a bad pay out as you wait for business to turn around.

Add Your Two Cents
What do you think will happen with General Motors going forward? Will price hikes, production cuts, and sales incentives, be enough to rejuvenate this stock? Be sure to join me (aytonmm) in the Free Stock Picking Community to share your thoughts and see what other investors are saying.

High fuel prices hurting your finances? Check out Getting A Grip On The Cost Of Gas.

By Ayton MacEachern

Ayton MacEachern is the Senior Financial Editor at Investopedia.com. After receiving his bachelor's degree in financial services from Mount Royal College in Calgary, Alberta, MacEachern began his career at an international securities trading firm. Before joining Investopedia in 2008, MacEachern worked in a variety of roles in the financial industry, including workers' compensation insurance underwriting, financial planning, and equity, currency and options trading. MacEachern is also Co-Founder of theskipper.ca, a source for online outdoor education.

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