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 its 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 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
|
|
Chesapeake Energy (NYSE: CHK )
|
(23.6%)
|
(56.6%)
|
*****
|
|
Transocean (NYSE: RIG )
|
(19.5%)
|
(56.7%)
|
*****
|
|
Pengrowth Energy Trust (NYSE: PGH )
|
(12.7%)
|
(45.2%)
|
*****
|
|
Brookfield Asset Management (NYSE: BAM )
|
(12.1%)
|
(57.2%)
|
****
|
|
Woodward Governor (Nasdaq: WGOV )
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(11.9%)
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(34.5%)
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*****
|
|
Norfolk Southern (NYSE: NSC )
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(10.9%)
|
(5.6%)
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*****
|
|
Apollo Investment (Nasdaq: AINV )
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(3.9%)
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(38%)
|
****
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Data from Motley Fool CAPS as of Dec. 16.
As the table shows, these stocks are all still very highly 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 begin some further research. I'll even get you started with some thoughts on Norfolk Southern.
Why so blue?
For decades, railroads had to wait for a movie about Jesse James to find themselves in the spotlight, but screaming oil prices helped them grab that spot in the real world over the past couple years. Shipments by truck became far less attractive, and suddenly, sending products by rail was what all the cool kids were doing. Of course, now that gas prices are hurtling back to Earth, throwing stuff onto the back of a locomotive doesn't seem quite as smart anymore.
But that's not all. In case you haven't heard yet, we're in a recession and nobody seems to know how bad it will get. Recessions tend to depress consumer spending, and that, in turn, tends to reduce what needs to be shipped around the country. A bad thing for railroads? You bet.
What the bulls say
It's hard for even a bull to ignore economic conditions, but as many of the world's best investors will tell you, it's not always about the short term. Just as the economic expansion that preceded the recession couldn't last forever, neither will the recession. At the same time, many investors believe that the correction in oil prices is one that will be short-lived and that we'll soon see prices jump well above their current lows -- once again making rail transportation attractive.
CAPS All-Star Vanheezy18 was thinking along these lines recently when he rated Norfolk Southern an outperformer:
I'm playing Monopoly in real life (kinda). As a young investor I'm buying 4 railroads and holding until i can buy other "properties". [CSX, Norfolk Southern, Burlington Northern, and Union Pacific] basically hold a oligopoly on American Railways--making 80% of the total railway profit. Whereas the economy will temporarily hurt, railways are better positioned to weather the storm than trucking, which means when the market rises, railways will have even more business and more profit.
So do you think the recent drop has created a good buying opportunity? Or will Norfolk Southern continue to be dragged down by the global slowdown? Let the community know what you think -- head over to CAPS and share your thoughts with 120,000-plus members. Even if you'd prefer to pass on Norfolk Southern, you can check out a couple of the other stocks listed above or any of the nearly 5,400 stocks that are rated on CAPS.
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