I'm always looking for a good deal, whether that means buying an extra box of cereal when it's on sale or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than its 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. Mr. Market's game is to pay you house calls on a daily basis to offer to sell you interests in businesses he owns or to buy from you interests in businesses you own. Sometimes Mr. Market will show up at your door very excited and offer you premium prices for your holdings, while at other times he'll be inconsolably depressed about the future and will offer to sell you what he has for as low as pennies on the dollar.
So, 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 (Out of 5) |
|---|---|---|---|
|
VASCO Data Security |
(27.1%) |
(55.1%) |
***** |
|
Sigma Designs |
(19.4%) |
(32.2%) |
***** |
|
Avnet |
(18.4%) |
(35.6%) |
***** |
|
North American Palladium |
(17.5%) |
(54.4%) |
***** |
|
Genentech |
(15.1%) |
(16.5%) |
**** |
|
America
Movil |
(7.5%) |
5.2% |
***** |
|
Seagate Technology |
(5.4%) |
(11.6%) |
**** |
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 some further research. I'll even get you started with some thoughts on VASCO Data.
Why so blue?
It's earnings season, so you can guess what's been giving VASCO shareholders heartburn recently. Though earnings per share in the first quarter met analysts' estimates, revenue fell well short. Year over year, revenue grew just 10%, while net income fell slightly and earnings per share were flat.
The company explained that part of the problem was a slowdown in the approval process from its banking clients. That may not be all that surprising, since financial institutions around the globe have more important things on their minds right now -- like trying to figure out how many billions they need to write down. Meanwhile, management noted that new product introductions should help put some spring back in the company's step.
Despite the slow quarter, management did stick by its full-year guidance of 25% to 35% revenue growth, which would suggest that there's some hefty growth to be had in the quarters to come.
What the bulls say
VASCO, which is a Stock Advisor recommendation, has a bulging fan club on CAPS where the stock is rated five stars and has over 1,800 outperform ratings. Many players like the fact that this digital security company is on the leading edge of authentication technologies for growing areas like e-banking. CAPS All-Star MJKpayday is one of the VASCO bulls who think the big picture is the big story for the company:
An interesting play on what could be a mega trend and newly developing industry. In the past when you went to the bank to withdraw money you'd have a simple driver's license and the attendant would look at the picture than you and bingo here is your withdrawal. Moving forward that attendant behind the virtual counter is going to require greater verification to ensure people are who they say they are.
So, do you think the recent drop has created a good buying opportunity? Or is there more downside ahead? Let the community know what you think. Head over to CAPS and share your thoughts with the other 100,000-plus players currently part of the community. Even if you'd prefer to pass on VASCO, you can check out a couple of the other stocks listed above or any of the 5,500 stocks that are rated on CAPS.
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