The stock-market gods have been unkind to many stocks so far this month. Some of those names deserved their punishment -- and some, in my opinion, didn't.
With that in mind, here are three stocks that have lost more than 10% in June, through Friday, that I think have solid rebound potential.
Valero Energy (VLO), a refining company based in San Antonio, Texas, is down around 13% for the month. I believe it deserves a better fate. This year, analysts expect the company to post a profit of $5.41 per share, which would represent its best showing since 2007. The stock trades at about $35, or less than 7x expected earnings.
Indeed, Valero is quoted a little above book value, or corporate net worth per share. Its debt comprises only 39% of stockholders' equity, a healthy ratio. The company pays a dividend, with a current yield of 2.3% -- and, in my opinion, there's plenty of room for an increase in the payout.
Shares of D.R. Horton (DHI), a homebuilder with headquarters in Fort Worth, Texas, have fallen more than 13% this month. I've always thought of this company as one of the better homebuilders, and I believe home construction is in a strong recovery that should last for at least a year or two.
On a statistical level, Horton sports a number of factors I like a lot. The company earned a 33% return on stockholders' equity in its latest fiscal year, and the stock sells for 1.3x revenue and 1.8x book value, which are reasonable multiples. The balance sheet, though not wonderful, is in my acceptable range. It is certainly a lot better than those of most homebuilders, which saw debt ratios soar during the bad times between 2007 and 2011.
Consol Energy (CNX), a coal and natural gas producer based in Canonsburg, Pa., has seen shares fall 14% so far in June. I am less confident about a rebound here than I am with the other two, but I do have a strong hunch it will occur.
Both coal and natural gas have been in a severe slump, the former because of more stringent pollution rules and the latter because of oversupply. Analysts are looking for Consol to have a weak 2013, though they expect 2014 to turn out pretty well. Since stocks generally move in advance of earnings, I wouldn't be surprised to see the stock outperform the broader market in the second half of this year.
The main thing that scares me about Consol is that so many analysts agree with me: Of the 27 who cover it, 22 rate it a buy. I would prefer to have less company. Still, I see little indication that investors are embracing Consol yet. The stock is trading under $30, compared with $67 at the end of 2007.
John Dorfman is chairman of Thunderstorm Capital LLC, a money-management firm in Boston. He can be reached by email here.