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.
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
|
|
Coventry Health Care (NYSE: CVH)
|
(12.5%)
|
(59.6%)
|
****
|
|
Taiwan Semiconductor Manufacturing (NYSE: TSM)
|
(9.0%)
|
(14.8%)
|
*****
|
|
Double-Take Software (Nasdaq: DBTK)
|
(8.5%)
|
(42.4%)
|
*****
|
|
Graham Corp. (AMEX: GHM)
|
(7.3%)
|
(62.5%)
|
*****
|
|
Genesee & Wyoming (NYSE: GWR)
|
(5.9%)
|
(35.7%)
|
*****
|
|
Markel (NYSE: MKL)
|
(5.7%)
|
(35.3%)
|
*****
|
|
Dolby Laboratories (NYSE: DLB)
|
(4.0%)
|
(19.1%)
|
*****
|
Data from Motley Fool CAPS as of June 16.
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 Taiwan Semiconductor.
Why so blue?
Often when a stock ends up on this list it's for a very clear reason. Maybe the company reported a less-than-stellar quarter or a competitor released a product that will be difficult to compete with. But sometimes it can be a bit of a mystery.
There was no one, clear driver for the drop that Taiwan Semi took over the past month, but we can make some pretty good guesses as to why investors might be selling.
For one, price could be a consideration. After trading at less than $6 back in November, Taiwan Semi's stock has been on a steady climb since, and nearly hit $12 last month. As a result of the stock's run and depressed earnings, its price-to-earnings ratio based on 2009 estimated earnings jumped to 23.
At the same time, the talk about recovery has cooled from a boil to a simmer, and so the enthusiasm about a procyclical business like semiconductor fabrication may have waned a bit.
What the bulls say
It's not hard to find a Taiwan Semiconductor bull on CAPS; 1,195 of the 1,230 members who have rated the stock have been positive on it. In fact, yours truly is one of them, as I've given Taiwan Semi a thumbs-up in my CAPS portfolio.
To get a better idea why members like this stock so much, let's take a look at what CAPS All-Star mkyorai had to say when giving the stock an outperform rating last year:
Sitting on a mountain of cash, minimal debt, consistent earnings growth, high insider ownership, and semiconductor manufacturing is slowly working its way into the world of the boring. They are repurchasing shares (albeit only to reduce share dilution from the company profit sharing plan), and they are paying a decent dividend. I am watching their inventory numbers with concern, doubly so because unlike commodities, getting a good handle on the value of semiconductors that can depreciate rapidly isn't easy, but overall, I feel this is a solid performer at a decent price.
So here's the question: Do you think the recent drop has created a good buying opportunity? Or will the stock need to cool off further? Head over to CAPS and share your thoughts with the other 135,000 members currently part of the community. Even if you'd prefer to pass on Taiwan Semiconductor, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.
More CAPS Foolishness:
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