"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful"
-- Warren Buffett
Can't argue with that, can you? I don't need to remind you of how much fear is in the market these days. It's a real gut check, but that fear is creating incredible opportunities for investors patient and diligent enough to search for the babies thrown out with the bathwater.
Using our Motley Fool CAPS ranking system's screening tool, I scanned for bargain companies with the following characteristics:
- Five-star ratings, since they indicate the best of breed.
- Trailing dividend yields of at least 3%.
- Price-to-book ratios no greater than 1.
- Greater-than-20% drops in share price over the last 13 weeks. I'm looking for bargains, right?
Among others, that screen dug up these beauties, which have been shredded to such paltry levels that it's hard to keep ignoring 'em. Take a look:
|
Company
|
13-Week
Price Change
|
Dividend
Yield
|
Price/Book Ratio
|
Price/Earnings
Ratio (TTM)
|
|
ConocoPhillips (NYSE: COP )
|
(22%)
|
3.6%
|
0.83
|
4.17
|
|
Gerdau (NYSE: GGB )
|
(28%)
|
5.1%
|
0.98
|
5.32
|
|
Royal Philips Electronics (NYSE: PHG )
|
(24%)
|
4.4%
|
0.74
|
3.17
|
|
Tsakos Energy Navigation (NYSE: TNP )
|
(35%)
|
9.8%
|
0.73
|
2.97
|
Data from Motley Fool CAPS as of Dec. 31. TTM= trailing 12 months.
None of these are formal recommendations -- just a good starting point for you to dig a little deeper. You can rerun an update of this screen yourself, if you like.
Patiently awaiting the return of Big Oil
Back in July, you could find a zillion analysts eager to explain why oil was a no-brainer at $145 a barrel. Today, you'll be hard-pressed to find one who thinks it's a worthwhile buy at $43 a barrel. Yes, demand has fallen off a cliff, but the fact that oil is not only finite, but virtually guaranteed to remain heavily sought-after for pleeenty of years hasn't changed at all.
What has changed in the oil world is (a) OPEC is frantically slashing production, and (b) consumers are regaining an appetite for gas-guzzlers, with trucks and SUVs expected to outsell cars last month for the first time since February. Both factors all but guarantee an eventual return of high oil prices.
Face it: Oil is still about as vital as it gets. As Warren Buffett once said of another commodity -- gold -- "It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility." Oil is practically the polar opposite, producing not only allure, but everyday, vital utility. Not surprisingly, Buffett himself spent billions of dollars in 2008 accumulating shares in oil giant ConocoPhillips.
Conoco shares ended the year down 40%, leaving them yielding 3.6% and a measly 4 times trailing earnings. Yes, oil seems to crumble by the day, but analysts still expect Conoco to earn $6.80 per share in 2009, equating to around 8 times forward earnings. Currently rival ExxonMobil (NYSE: XOM ) is trading for almost 13 times forward earnings.
CAPS member mikerphilly sees this discrepancy as a pretty compelling buying opportunity, noting:
Conoco Phillips is my big oil pick simply because it's the most underrated. Exxon is a stronger company, but its ... share price reflects that popularity. The potential for share-price growth is far better with other large oil companies like [ConocoPhillips] and BP (NYSE: BP ) . This is safe bet for 30-40% growth over the next year (by December 2009).
If you're looking for a Big Oil stock not quite leveraged, consider Chevron (NYSE: CVX ) . It's not as cheap on a forward-earnings basis, but its balance sheet is absolutely rock-solid, which seems to be the lure du jour in this market.
Your turn
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