"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
-- Warren Buffett
Can't argue with that, can you? I don't need to remind you of how much fear is in the market these days. It's a real gut check, but that fear is creating opportunities for investors patient and diligent enough to search for the babies thrown out with the bathwater.
Using our Motley Fool CAPS ranking system's screening tool, I scanned for bargain companies with the following characteristics:
- Five-star ratings -- the highest our CAPS community offers.
- Estimates of profitability in 2009.
- Price-to-book ratios no greater than 1.
- Dreadful performance over the past 52 weeks. Yes, almost every stock meets this condition, but I'm looking for the biggest of the big. The complete capitulators. The mothers and fathers of all bargains.
Among others, I dug up these six, which have been shredded so far it's hard to keep ignoring 'em:
|
Company
|
52-Week
Price Change
|
Price/Book Ratio
|
Recent Price
|
2009 Earnings Estimates
|
|
ChesapeakeEnergy (NYSE: CHK )
|
(61%)
|
0.69
|
$17.97
|
$2.08
|
|
iNventive Health (Nasdaq: VTIV )
|
(72%)
|
0.73
|
$7.99
|
$1.35
|
|
NamTai Electronics (NYSE: NTE )
|
(66%)
|
0.45
|
$3.40
|
$0.04
|
|
Suntech Power (NYSE: STP )
|
(77%)
|
0.97
|
$7.40
|
$0.51
|
|
Terex (NYSE: TEX )
|
(83%)
|
0.56
|
$9.89
|
$0.65
|
|
Titanium Metals (NYSE: TIE )
|
(63%)
|
0.88
|
$5.56
|
$0.37
|
Data from Motley Fool CAPS, Yahoo! Finance, as of March. 19, 2009.
None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can rerun an update of this screen yourself, if you like.
What's up with Terex?
Well, that's an easy answer: Business is precariously attached to a global building market currently in a deep, deep coma. Long story short, what was once a highflying global juggernaut is on the brink of violating debt covenants -- essentially step one on the road to bankruptcy.
Now, while I know the word "bankruptcy" causes a Pavlovian response to panic and flee, things aren't as bad as they sound. Bankruptcy is actually extremely unlikely in Terex's case. Just recently, the company received concessions on its covenants that should keep everyone satisfied for the time being. Banks and bondholders have a tremendous incentive to work out new terms with high-quality and notoriously cyclical companies like Terex that will, barring the apocalypse, eventually rebound. Hence, you get a situation where the market is petrified by a situation that doesn't appear likely to happen.
That's likely why our CAPS community is filled with people like Bdolleydog, who wrote of Terex earlier this year, "Solid infrastructure and corporate management that has plenty of reserve cash and is selling at a discount rate. This is as solid as it gets in the mining, heavy equipment industry." Or Trimalerus, who writes, "This stock appears to have hit bottom and is on its way to an up swing in the next three years. It might take a moment to get going but I'm in it for the long haul."
Terex is in a situation similar to Cemex (NYSE: CX ) -- bogged down by very real debt concerns, but actively and successfully working around those problems, and priced at such ghastly low levels that investors don't even need business recovery -- just stabilization -- to make shares extremely attractive. Neither are surefire bets by any means, but both are now priced at risk/reward levels that look mighty attractive for gung-ho investors.
Your turn to chime in
What do you think about Terex? Is this a crazy bargain, or a dead man walking? More than 130,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate
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