"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett
Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.
In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.
Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled this shopping list of potential picks, we'll check them against the collective intelligence of Motley Fool CAPS.
Today's contenders include:
| Company |
Recent Price
|
CAPS Rating
(5 max):
|
|
Seaboard (AMEX: SEB )
|
$1297.00
|
****
|
|
Radiant Systems (Nasdaq: RADS )
|
$9.12
|
****
|
|
International Royalty (AMEX: ROY )
|
$3.20
|
****
|
|
Overhill Farms (AMEX: OFI )
|
$6.50
|
****
|
|
Aurizon Mines (AMEX: AZK )
|
$3.03
|
****
|
Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.
Will the guilty party please take one step forward?
OK. Who's been playing around with my CAPS screen? No way does it churn up four Amex-listed stocks all in one day. No way does it give me five stocks, each of which bears an equal four-star rating ... right?
Apparently, it did. But whether this means Wall Street has soured on Amex as a whole, or just hates pork, hotel software, gold, and TV dinners this week -- I cannot say. I can tell you that one stock jumps out at me from this list. Last time I saw a stock selling for four figures, it was run by Warren Buffett and called Berkshire Hathaway (NYSE: BRK.B ) . Last time I saw one selling for even three figures, it was called Markel (NYSE: MKL ) and run by folks who admire ... Warren Buffett.
Now, a price would be a pretty silly thing to hang a whole buy thesis on -- but those two companies have done awfully well for their investors over the past decade. Call me an optimist, but I'm thinking we might want to take a closer look at ...
The bull case for Seaboard
Writing in September 2006, akachmar got us off to a propitious start (wait for it ... ):
Seaboard is a company most people have never heard of, but it's also one all investors should know. The company is very conservatively managed and is engaged in "boring" industries such as food processing and maritime shipping. However, one look at its financials will leave value investors druelling [sic] ... The price is high ... but that's only because they have adopted a Buffet-like philosophy of no splits.
But aside from Buffett, are there other reasons to like Seaboard? LimoDriver1971 gave us a couple back in May:
Pork becomes the new meat option as red meat becomes more and more expensive to produce. Overseas shipping costs still rise, allowing the industry to charge silly fees and fuel surcharges. The market corrects, the fees stay in place and the cost to ship doesn't change. Who makes out? These guys.
At this point, I should probably mention that Seaboard's businesses include both pork processing and container shipping -- it also trades commodities, refines sugar, and owns... two floating electric power generators servicing the Dominican Republic. Seriously.
To summarize, then, PQ78 puts it simply: "This company does just about everything." Also: "Look at insider trading and you will see there is none, but you will also notice that the insiders own a lot of stake in the company."
So far as I can tell, no analysts pay any attention to Seaboard. But why would they? Seaboard doesn't need their loans -- it has a rock-solid balance sheet and, although it's been burning a bit of cash recently, in most years it generates plenty of free cash flow.
Just because Wall Street pays it no mind, though, doesn't mean you should ignore Seaboard. In addition to a solid balance sheet and generally profitable operations, the company sells for a dirt cheap P/E of 9. Of course, without analyst estimates to lean on, we have to guess at its growth prospects -- but the 15% annual revenue growth it has averaged over the past five years, and the near 23% rate of growth in tangible book value, both suggest to me that those prospects are substantial.
All in all, I think you have little reason to fear owning this one. In fact, I'd even hazard a guess that it could be time to get greedy. If you've ever dreamed of owning Cargill, and sputtered in frustration upon learning that that firm is private, Seaboard gives you the chance to buy a reasonable substitute at a more than reasonable price.
Time to chime in
Agree or disagree, post your thoughts on CAPS -- it's free. (And it almost rhymes.)
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