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 it's 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 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
|
1-Year Return
|
Current CAPS Rating
(out of 5)
|
|
Excel Maritime Carriers (NYSE: EXM )
|
(12.3%)
|
(9.0%)
|
****
|
|
ChinaMobile (NYSE: CHL )
|
(8.4%)
|
(5.5%)
|
*****
|
|
Petrobras (NYSE: PBR )
|
(7.9%)
|
112.5%
|
*****
|
|
ICICI Bank (NYSE: IBN )
|
(5.1%)
|
95.8%
|
****
|
|
Satyam Computer Services (NYSE: SAY )
|
(4.9%)
|
(40.9%)
|
****
|
|
PACCAR (Nasdaq: PCAR )
|
(4.7%)
|
36.4%
|
****
|
|
Marathon Oil (NYSE: MRO )
|
(4.5%)
|
30.9%
|
*****
|
Data from Motley Fool CAPS as of Dec. 22.
As the table shows, these stocks are 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 China Mobile.
Why so blue?
Often there is a very obvious recent catalyst that causes an investor sell-off in a particular stock. In the case of China Mobile, that catalyst may not be all that recent, but investors have been spooked nonetheless.
Back in August, the company reported earnings that missed analyst expectations and showed its first profit decline since 1999. The troubles were attributed to the company adding users in lower-income areas of China as well as increased competition.
After a 22%-plus decline since early August, China Mobile's stock has underperformed the stocks of major competitors like China Unicom and China Telecom. It has shown even more significant underperformance when measured against the Hang Seng Index, which is up nearly 50% over the past 12 months.
What the bulls say
While the market has had a pretty dour view of China Telecom recently, CAPS members have been notably more bullish. The stock has nearly 3,300 outperform ratings against just 83 underperforms.
For investors with a long-term view, the bullishness shouldn't be all that surprising. The company is a leader in the rapidly growing Chinese market and has produced significant profits backed up by even more significant cash flows. Thanks in part to the recent sell-off, China Mobile's stock now trades at less than 11 times expected profit over the next 12 months, and it sports a significant dividend yield.
CAPS All-Star Caligiuri recently became a China Mobile bull on CAPS and had this to say about the stock:
Leader in an emerging market so it's hard to say it's overvalued. Plus, CHL offers a great dividend. The balance sheet is definitely not flawless, but I expect the company to generate enough cash to improve the balance sheet over time.
But here's the important question: Do you think the recent drop has created a good buying opportunity? Or will China Mobile continue to struggle? Head over to CAPS and share your thoughts with the 145,000 members. Even if you'd prefer to pass on China Mobile, you can check out a couple of the other stocks listed above, or any of the 5,300 stocks that are rated on CAPS.
Want to be rich? My fellow Fool Morgan Housel recently highlighted 10 tips from Charlie Munger on how to do just that.
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