Shares of Level 3 Communications (LVLT) have taken a turn for the worse, after the firm's fourth-quarter earnings report landed with a thud. The company confessed to a net loss of $52 million, or 3 cents per share, narrowed from its year-ago deficit of $182 million, or 11 cents per share. Revenue for the quarter declined to $921 million from $924 million.

The results actually surpassed Wall Street's consensus forecast, which called for a net loss of 10 cents per share on revenue of $920.1 million. However, traders seem none too pleased with Level 3's earnings performance, as the stock plummeted roughly 7% Wednesday morning. In particular, it seems the market may be taking issue with Level 3's warning that it expects free cash flow to be negative for fiscal 2011.

AES Corporation (NYSE: AES), the emerging-market power generation company, has had a tough few months, declining from $24 to $20.50 -- a big decline for a company with steady and large cash flow generation.

The stock's weakness began when its multi-year earnings guidance was a little lower than expected. Another reason for investor nervousness is that in the last liquidity crisis, from 2000 thru 2002, the stock got crushed as the company suffered from a seriously leveraged balance sheet with concerns about bankruptcy being high.

However, this time around, the company has considerably less debt and generates considerably more cash flow. Also, emerging markets around the world have an even greater understanding that they must place an emphasis on power generation if they want their economies to improve.

Having dropped 15% during the past month, it may be time to consider bottom fishing in AES. The stock has been trading nicely between $20 and $24.

Airlines stocks are entering the seasonally strongest period, after having a pretty good correction. It looks like a good trading opportunity.

One stock we have blogged about in the past with good success has been UAL Corporation (NASDAQ: UAUA). UAL has had a serious correction, dropping from a January 2007 high of $50 and is now around $35.50.

What is attractive about UAL is that it has a strong franchise name and a boat load of cash and little debt. Finishing up the first quarter with $4.2 billion and just $1.2 billion in balance-sheet debt.

Operating cash flow increased by 38% from the first quarter of 2006 to approximately $626 million.

While there are some capacity issues for the most recent quarter, buying a stock with $4.2 billion in cash, balance-sheet debt of $1.2 billion and generating $626 million in OCF, is just too cheap to pass up. Look for United to revisit its $50 higher.

I recently received a comment to an article I wrote a while back questioning my favorable opinion of Home Depot (HD) where I stated that despite its poor performance this year I still felt it was a good core holding; thus I feel a "public airing" is in order.

The following was the comment I received on Thursday, June 29:
    Why would you list The Home Depot as a "solid company" and give people the impression it's a stock to buy or hold at this time?  Investors have had trouble with management, the board of directors, and the the direction the Home Depot is going.
     Price of HD stock has been declining since the first of the year. It hasn't been doing well over the last five years. This is a stock a person has to gamble on. Flip a coin, cut a deck of cards, roll the dice, then decide if you want to invest. There is no "solid" evidence that this is a "must have in my
portfolio" stock.
     Todays Home Depot is not the money maker of 5 or 10 or 15 years ago because it's not the same company.