Stocks of restaurants, financial services, retailers bounce back

It's probably too early to pronounce the bear market dead, but a number of stocks seem to have survived their own near-death experiences.

Nearly 50 stocks have had brushes with a deep correction and lived to tell the story. Those 46 stocks have tripled or more from their 52-week lows and now have stock prices of at least $10 a share, according to a USA TODAY analysis of the stocks in the Standard & Poor's 1500 using data from Capital IQ.

These bounce-back wonders fall into different industries, but they all fit into the common theme of being at the epicenter of worries about the housing crash and slowdown in consumer spending.

"Many of the stocks that were beaten down deserve to rally," says Robert Maltbie of Singular Research. "I'm pulling for this to be real."

Restaurants focusing on cost control

It turns out consumers aren't quite ready to trade dining out for TV dinners. While top restaurant stocks as a group lost half their value in February from their 52-week highs, investors are starting to scoop them back onto their plates.

DineEquity din, which owns IHOP, Chili's operator Brinker eat and Cheesecake Factorycake are all some of the biggest gainers. Investors had written off restaurants as one of the easiest things consumers could cut back on to save money. But seeing how restaurants are managing their costs, DineEquity, Brinker and Cheesecake are up 399%, 327% and 206%, respectively, from their 52-week lows.

Much of the rebound in the restaurant stocks' value is a function of them being overly punished, says Brad Ludington, analyst at KeyBank. Restaurant stocks were "priced as if they were going out of business," he says.

The operating environment for restaurants is still difficult. Even so, Ludington says, restaurants' earnings may be better than expected as the companies trim costs and cut back on opening new locations. Many restaurants are using the money they're not spending on new sites to pay down their debt.

Consumer-facing companies, such as retailers

While retail sales data for April came in weaker than expected, investors are looking beyond the headlines for a few retailers. Though other department stores' stocks are still struggling, Nordstromjwn has rocketed 215% from its 52-week low. And on the less posh side of retailing, Big 5 bgfv, a seller of sporting and camping gear, has surged 258% from its 52-week low. While not specifically a retailer, Palm palm, a seller of digital gadgets, is up 788% on high hopes for its soon-to-be released Palm Pre, expected to give Apple's iPhone competition from consumers.

More surprising has been the rally in independent car retailers, such as Group 1 Automotivegpi and AutoNation an, which are up 322% and 284% from their 52-week lows. Many of these stocks were beaten up as investors assumed bad news for big carmakers meant trouble for independent retailers, says Rexford Henderson, analyst at Raymond James. Car retailers will likely be pressured through 2009 as the automakers close dealerships, and inventories of unsold cars swamp the market.

But longer term, the survivors will benefit from less competition, Henderson says. And the dealers are worlds apart from the automakers. Rather than being stuck with the large fixed costs of giant carmaking plants, auto dealers' biggest costs — commissions to salespeople — fall if revenue falls. And because car sellers cut costs quickly to respond to slowing business, many have remained profitable during some points of the downturn. Group 1, for instance, turned a profit of $8.4 million in the first quarter and has been profitable in four of the past six quarters.

"Investors failed to see how flexible and adaptable these retail models are," Henderson says. That said, Henderson doesn't expect car-retailing stocks to keep revving higher until job growth resumes and car sales heal. And that could be mid to late 2010, he says.

Companies at the epicenter of the financial crisis: Financial and housing stocks

Investors who anticipated that the government's stress test results, released this month, wouldn't be as scary as feared scored big gains on the megabanks. Bank of Americabac, Morgan Stanleyms and Wells Fargowfc are big winners, as investors took the risk of nationalization off the table. Financial services firm Prudential Financial pru, insurer Aflac afl and home builder Meritage Homes mth have also bounced back as fears about the financial system have eased. "It looks like the zombies will be resuscitated," Maltbie says.

But investors should be careful before assuming that a big recovery in some stocks means the businesses themselves will heal anytime soon.

For instance, some casino operators such as Pinnacle Entertainment pnk are up strongly, following brutal drops in those stocks. But Maltbie warns that many companies that depend on free-spending consumers, such as casinos, are likely to see a challenging business environment for years. "We have relief. Stocks dodged a big bullet," Maltbie says. "But for many companies, it's still going to be tough."