Falling knives are companies whose share prices have declined more than 59% over the last 52 weeks. Investments in these securities are based on expectations that the stock will bounce back enough to generate large returns.Â
Investors are also aware that such depreciation could indicate financial distress, so their portfolios could suffer a loss if the company fails.
If investors choose falling knives with a moderate to low financial burden, however, they can meaningfully lower the risk of loss.
Along with a moderate to low debt-equity ratio, the following securities have overweight recommendation ratings. The rating indicates the company is forecasted to outperform either its industry or the entire market.
Here are some results from my search.
Shares of Abiomed Inc. (ABMD, Financial) closed at $177.65 on Thursday for a market capitalization of $8.06 billion. The stock declined 61% over the last 12 months through Sept. 26.
The Danvers, Massachusetts-based medical devices manufacturer has no debt.
GuruFocus assigned a rating of 9.6 out of 10 for the company's financial strength and an 8 out of 10 rating for its profitability and growth.
The closing price on Thursday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $175.74 to $459.75.
The price-earnings ratio is 31.78 compared to the industry median of 28.75 and the price-sales ratio is 10.28 versus the industry median of 3.35.
The 14-day relative strength index of 31 suggests the stock is approaching oversold levels.
Wall Street issued an overweight recommendation rating with an average target price of $235.
Shares of Grubhub Inc. (GRUB, Financial) closed at $55.93 per share on Thursday for a market capitalization of $5.11 billion. The stock declined 60% over the past 12 months through Sept. 26.
The Chicago-based operator of an online food ordering and delivery marketplace has a debt-equity ratio of 0.42 versus the industry median of 0.2.
GuruFocus assigned a rating of 6.3 out of 10 for the company's financial strength and rating of 7 out of 10 for its profitability and growth.
The closing price on Thursday was below the 200-, 100- and 50-day simple moving average lines. The 52-week range was $53.24 to $140.37.
The price-earnings ratio is 215.20 compared to the industry median of 25.18 and the price-sales ratio is 4.4 versus the industry median of 2.04.
The 14-day relative strength index of 33 suggests the stock is approaching oversold levels.
Wall Street issued an overweight recommendation rating with an average target price of $89.17.
Disclosure: I have no positions in any securities mentioned.
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