I'm always looking for a good deal, whether that means buying an extra box of Cocoa Puffs 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 tells us, by way of allegory, how we can look out for these situations.
In The Intelligent Investor, Graham introduces readers to a wacky guy named Mr. Market. This gent pays you house calls on a daily basis, offering to sell you 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. Other times, he'll be totally depressed about the future, offering 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 received a five-star rating (the highest) from our community of more than 65,000 investors just 30 days ago:
|
Stock
|
30-day return
|
One-year return
|
Current CAPS rating
|
|
MFRI
|
(24.9%)
|
17.3%
|
****
|
|
Varian Semiconductor (Nasdaq: VSEA)
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(12.4%)
|
84.7%
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*****
|
|
Webzen (Nasdaq: WZEN)
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(11.1%)
|
16.1%
|
****
|
|
Napco Security Systems
|
(9.8%)
|
(3.7%)
|
****
|
|
Watts
Water Technologies (NYSE: WTS)
|
(7.7%)
|
(0.3%)
|
****
|
|
Noble (NYSE: NE)
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(7.6%)
|
51.9%
|
*****
|
|
Allis-Chalmers Energy (NYSE: ALY)
|
(6.9%)
|
37.5%
|
*****
|
Data from Motley Fool CAPS as of Oct. 10, 2007.
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 Varian Semiconductor.
Over the past month, Varian has been moving against the tide, sliding downward just as much of the tech world rallied. In the semiconductor space, Texas Instruments (NYSE: TXN) and National Semiconductor have posted gains of 13% and 8%, respectively, since mid-August. Though Varian was hitting all-time highs as recently as early September, the stock has since hit the skids, down 17% from its peak.
No fundamental news from Varian seems to have prompted the sell-off. The stock is still up 85% over the past 12 months; perhaps some skittish investors, worried about "locking in gains," have started jumping ship.
We do know that CAPS players have quite a yen for Varian. In all, 91 of the 92 CAPS All-Stars (players ranked in the top 20% of CAPS) who have rated the stock think that it will outperform the broader market. Many CAPS players have been attracted to the stock because of Applied Materials' (Nasdaq: AMAT) departure from the ion implant segment of the semiconductor capital equipment market.
"Now that Applied Materials has exited the implantation market, the road is paved for Varian!" wrote Magistrate, one of the All-Stars bullish on Varian.
Has the recent drop created a good buying opportunity? Or is something brewing at Varian that will hurt the stock more? Let the community know what you think -- head over to CAPS and share your thoughts. Even if you'd prefer to pass on Varian, you can check out a couple of the other stocks listed above, or any of the 5,000 stocks currently rated on CAPS.
More CAPS Foolishness:
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