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 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
|
|
Yingli Green Energy (NYSE: YGE )
|
(34.8%)
|
102.0%
|
*****
|
|
Aluminum Corp. of China (NYSE: ACH )
|
(30.2%)
|
76.5%
|
*****
|
|
China Natural Gas (Nasdaq: CHNG )
|
(25.1%)
|
101.5%
|
*****
|
|
Navios Maritime (NYSE: NM )
|
(19.6%)
|
43.1%
|
*****
|
|
KHD Humboldt Wedag (NYSE: KHD )
|
(18.2%)
|
31.0%
|
*****
|
|
Western Union (NYSE: WU )
|
(17.7%)
|
32.7%
|
*****
|
|
Sasol (NYSE: SSL )
|
(17.2%)
|
31.6%
|
*****
|
Data from Motley Fool CAPS as of Feb. 10.
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 Aluminum Corp. of China (aka Chinalco).
Why so blue?
As a key metals player in China, Chinalco is heavily dependent on China's economic outlook. It's no secret to investors that the country's outlook has been almost blindingly bright for some time now, and much of the focus has been on China's love for infrastructure projects -- a romance that has great implications for materials companies like Chinalco.
However, there has been a growing concern over the possibility that a bubble is forming in China. The Chinese government has been lending some credence to that idea as it takes action to cool off the economy. If a bubble hasn't already gotten out of control, tapping the economic brakes could be a very prudent move, but it's still a move bound to take the wind out of a cyclical company like Chinalco.
Over the past month, investors have likely taken a double dose of caution when it comes to Chinalco's stock as either outcome -- a successful throttling-back of the economy or a nasty bursting bubble -- isn't particularly good for the aluminum giant.
What the bulls say
Unless China is too late with the fiscal tranquilizers and a raging bubble does burst, the long-term outlook for China's huge growth should remain intact, although it may still mean a bumpy road for Chinalco in the near term.
Of course near-term underperformance probably won't shake too many of the CAPS members who are bullish on Chinalco. More than 3,400 members have given the stock a thumbs-up, and most seem to be looking to cash in on the long-term growth in China. CAPS All-Star barnettech joined the bullish chorus last fall and had this to say:
Chinese growth means a monsterous appetite for metals. And this is a Chinese metals company. Look for this to show monster growth over 20 years. I bought it during the market crash and doubled. Look for commodity based companies to carry you if inflation hits from all the money printing and fiscal spending during the 2008 market crash.
But here's the important question: Do you think the recent drop has created a good buying opportunity? Or will Chinalco stock continue to struggle? Let the community know what you think -- head over to CAPS and share your thoughts with the other 150,000 members. Even if you'd prefer to pass on Chinalco, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.
Warren Buffett has offered a lot of advice over the years, but could this be his best advice ever?
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