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
(out of 5)
|
|
ATP Oil & Gas (Nasdaq: ATPG )
|
(22.8%)
|
(82.4%)
|
*****
|
|
Mosaic (NYSE: MOS )
|
(19.0%)
|
(69.3%)
|
****
|
|
National Oilwell Varco (NYSE: NOV )
|
(15.4%)
|
(63.2%)
|
*****
|
|
Chesapeake Energy (NYSE: CHK )
|
(12.5%)
|
(69.6%)
|
*****
|
|
Tata Motors (NYSE: TTM )
|
(12.0%)
|
(15.2%)
|
****
|
|
OceanFreight
|
(10.7%)
|
(92.4%)
|
*****
|
|
Foster Wheeler (Nasdaq: FWLT )
|
(10.4%)
|
(67.5%)
|
*****
|
Data from Motley Fool CAPS as of June 30.
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 Mosaic.
Why so blue?
After a few very impressive years of earnings growth in the fertilizer industry, it appears that 2009 has brought a bit of a chill to the industry. Thanks to a 36% drop in sales, Mosaic -- which is the largest worldwide supplier of phosphate fertilizer and one of the largest producers of potash -- saw its net income drop nearly 90% for its fiscal third quarter in February.
More recent coverage of PotashCorp (NYSE: POT ) -- one of its chief competitors -- has suggested that the upcoming quarter may not be any prettier. In mid-June, fellow Fool Toby Shute noted another production cut at PotashCorp and highlighted the rapidly climbing inventories in the potash industry.
Then, just last week, PotashCorp took a chainsaw to its second-quarter earnings forecast, citing lower-than-expected potash sales volumes. Though Mosaic's recent experience may not line up perfectly, it's hard to believe that it's chalking up big numbers while PotashCorp's customers are keeping their wallets shut.
What the bulls say
As the U.S. Federal Reserve continues to pump money into the system to aid struggling banks and the economy, many people are beginning to fret over the possibility of inflation setting in.
Were we to be struck with price inflation, commodities are a pretty good place to have your cash stashed to avoid having the value of your savings melt away. Commodity hiding places include oil, metals (yes, that includes gold), and -- wouldn't you know it -- fertilizers like phosphates and potash.
But there's another thesis for Mosaic that CAPS member WhiskeyGirl highlighted last month:
I'm convinced by the articles on increasing global population combined with decreasing arable land, water shortages etc. Also, in Asia, with increasing prosperity (once the economy picks back up), there is increased demand for better food and more choice. I believe an increasing middle class will create more food demand and fertilizers will help increase the yield per acre.
It's the theory of global population and wealth expansion that persuaded me to give Mosaic a thumbs-up in my own CAPS portfolio. After all, it's tough to bet against China, and it's doubly tough to bet against the need for plentiful food.
But here's the important 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 of the community. Even if you'd prefer to pass on Mosaic, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.
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