I am always looking for a good deal, whether that means buying an extra box of Golden Grahams when they're on sale, or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than it's worth may seem silly, but legendary value investor Ben Graham (no relation to the cereal) tells us, by way of allegory, how we can look out for these situations.
In The Intelligent Investor, Graham introduces readers to a wacky chap named Mr. Market. Mr. Market's game is to pay you house calls on a daily basis, to offer to sell interests in businesses he owns or to buy interests in businesses you own. Sometimes Mr. Market will show up at your door very excited, offering you premium prices for your holdings. At other times, he'll be inconsolably depressed about the future, and he'll offer to sell you what he has for as low as pennies on the dollar.
To find some of the stocks that Mr. Market is depressed about, I've turned once again to The Motley Fool's CAPS investor community. Each of the companies below had been given a five-star rating (the highest) by our community of investors just 30 days ago:
|
Stock
|
30-day return
|
One-year return
|
Current CAPS Rating
|
|
Lufkin Industries (Nasdaq: LUFK )
|
(20.8%)
|
(57.8%)
|
*****
|
|
Mosaic
|
(13.8%)
|
(72.4%)
|
****
|
|
Novartis (NYSE: NVS )
|
(7.9%)
|
(24.7%)
|
*****
|
|
Sasol (NYSE: SSL )
|
(7.6%)
|
(49.0%)
|
*****
|
|
PepsiCo (NYSE: PEP )
|
(7.1%)
|
(28.5%)
|
*****
|
|
BHP Billiton (NYSE: BHP )
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(6.0%)
|
(43.7%)
|
****
|
|
Philip Morris International (NYSE: PM )
|
(4.9%)
|
(24.2%)
|
*****
|
Data from Motley Fool CAPS as of April 22.
As the table shows, these stocks are all still very well-regarded by the CAPS community, despite their underperformance over the past month. While these are not formal recommendations, they could be a great place to kick off further research. I'll even get you started with some thoughts on PepsiCo.
Why so blue?
Much of PepsiCo's decline over the past month came on Monday, when the company announced quarterly earnings. Its revenue dropped slightly, but earnings grew 3% from the prior year, even as beverage sales declined. Earnings per share still topped analysts' expectations.
The same day that the company announced earnings, it also announced its intention to acquire its two largest bottlers -- Pepsi Bottling Group and PepsiAmericas. These are no small-fry acquisitions. In fact, Pepsi Bottling Group alone is larger than Dr Pepper Snapple Group, and the two Pepsi bottlers combined are now valued at more than $9 billion. So were investors concerned about the acquisitions?
That's quite possible. However, many industry watchers -- though surprised -- see huge potential benefit from the combination, since it should limber up Pepsi's distribution. And that's not to mention the couple of hundred million in cost savings that the company expects to see.
What the bulls say
We're left with a company delivering on earnings in a tough climate, and making moves to create long-term advantages, while seeing its stock fall. Sounds like a pretty good deal, right? I'd say so, and I'm joined by the more than 3,300 CAPS members who have helped give PepsiCo's stock a five-star rating.
CAPS member bejeweledfool, who became a PepsiCo fan earlier this month, likes the solidity of its brands: "Pepsi and Pepsi products have been around forever and will be here for another eternity. Low debt, big moat and good yield."
Meanwhile, fellow PepsiCo bull and CAPS All-Star hondo928 has had a thumbs-up on PepsiCo since last October:
Cheap as dirt at this price, yes the P/E isn't great but they are very safe, and have some of the best management in the whole world, [Coke (NYSE: KO ) ] trades at a higher premium, and … has a less diversified product offering, something that Pepsi has an advantage with. They are more than just a soda company.
So do you think the recent drop has created a good buying opportunity? Or will the stock continue to be a laggard while the rest of the market rallies? Let the community know what you think -- head over to CAPS and share your thoughts with the other 130,000 members. Even if you'd prefer to pass on PepsiCo, you can check out any of the 5,300 stocks that are rated on CAPS.
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