That company is certainly not J.C. Penney. I didn’t even know it was possible to deliver a same-store-sales drop of 31.7% in a single quarter, but J.C. Penney Company, Inc. (NYSE:JCP) proved me wrong. Management appears completely lost as to what to do. CEO Johnson says he’ll let the customer dictate J.C. Penney Company, Inc. (NYSE:JCP)’s plans moving forward, but that seems a tough sell considering that Johnson attempted to dictate how customers should react since taking over.
Garmin is another company we can easily extract from the bounce-back list. Garmin is investing heavily in research and development to drive sales, but its product is antiquated next to today’s smartphones and tablets. In areas where reception is limited (e.g., the ocean), Garmin still offers incredible value, but it’s likely that its total sales potential will continue to dwindle.
U.S. Steel is another company that can be pretty easily removed from this equation. It isn’t that I don’t like steel companies (because I do); it’s that U.S. Steel is one of the worst of the bunch. With one of the highest debt-to-equity ratios among its peers, U.S. Steel has a long way to go in terms of paying down its debt before it’s back on my buy radar.
What this came down to is a tough call between Cliffs Natural Resources and Peabody Energy Corporation (NYSE:BTU). Ultimately, I’ve chosen Cliffs Natural Resources, the first quarter’s worst performer, as my best bet to rebound moving forward.
I like Peabody Energy Corporation (NYSE:BTU); don’t get me wrong. However, I’m concerned that Peabody Energy Corporation (NYSE:BTU)’s overseas costs will get out of hand and depress its margins for the next couple of quarters.
I don’t have those same worries with Cliffs Natural, which has its costs under control — especially with a 76% dividend cut — and which cut its net debt in half with a 10.4 million secondary share offering. A $157 billion infrastructure bill in China aimed at boosting GDP growth, coupled with a revival in homebuilding activity in the U.S., should have both met-coal — which is used to strengthen steel — and iron ore prices stabilizing and rising in no time. In fact, iron ore prices in February were at their highest levels since September 2011. At just eight times forward earnings and with a yield nearing 3%, Cliffs Natural is a good bet to rebound strongly in the coming quarters.
The article Which Bottom-5 S&P 500 Stock Has the Best Chance to Bounce Back? originally appeared on Fool.com is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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