You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?
Smart investors like Warren Buffett or Marty Whitman love it when their stocks are suddenly selling at bargain-basement prices. For them, these companies become no-brainer buys.
The investors in the Motley Fool CAPS community also like a bargain, apparently. Below, you'll find three companies whose shares are selling at least 50% below their 52-week highs, but which still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.
|
Stock
|
CAPS Rating (out of 5)
|
% Off 12-Month High
|
|
Patriot Coal (NYSE: PCX )
|
****
|
53%
|
|
SandRidge Energy (NYSE: SD )
|
*****
|
60%
|
|
Taser (Nasdaq: TASR )
|
****
|
53%
|
Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your portfolio.
Take two, they're small
Patriot Coal's decision to close its Harris No. 1 mine after a roof collapse seems destined to impede the coal miner's progress going forward. Even though no one was injured in the incident, it's just another in a series of accidents that have plagued the industry. Massey Energy's (NYSE: MEE ) West Virginia mine explosion killed 29 miners earlier this year.
By lumping the two accidents together, the market has given investors the opportunity to pick up Patriot's stock on the cheap. While the Harris mine produced nearly 12% of Patriot's metallurgical coal volume in 2009 -- met coal commands higher prices on the market -- there was already a plan in place to close it down next year. While the earlier closure of the mine may cause a slight hiccup in Patriot's met coal production plans, it's not fatal to its longer-term growth opportunities.
Moreover, mine closures both here at home and internationally could grant coal miners even higher prices for their output. Alpha Natural Resources (NYSE: ANR ) , the largest met coal exporter, sees opportunities internationally because of three major mine closures in Russia. A string of accidents around the globe in met coal mines could put pressure underneath prices. While Patriot's basically a domestic producer, it would still benefit from any increases.
Investors are considering their options when it comes to Patriot, and some of CAPS All-Stars like 4everlost like the risk-reward ratio they're seeing:
Like most of the other Fools that recently added PCX to their outperform list I think that they have been unduly punished. I really like companies that are oversold in must have industry sectors (IMO demand for coal is going to increase over the next 5 years) that have low debt and a low cost structure. There could even be a "flight to energy" in the short term.
A reserve player
The energy sector is swept up a wave of consolidation, with Apache (NYSE: APA ) buying Mariner Energy, ConocoPhillips and Royal Dutch Shell entering into deals, and SandRidge Energy buying Arena Resources (NYSE: ARD ) . While CAPS member Teacherman1 finds the latter deal interesting, it's not without risk. A failure here could set SandRidge up as a possible takeover target itself.
When the deal was announced, the Fool's Toby Shute pointed out that the price tag SandRidge was paying valued Arena's flowing barrels of oil at exceptionally high prices. Toby also noted that much of Arena's reserves were still undeveloped; SandRidge will have to work harder and spend more to tap into them.
The CAPS community hasn't given up on SandRidge's potential, though; 97% of the nearly 1,000 members weighing in on the oil and gas play believe it will outperform the broad market averages. Let us know on the SandRidge Energy CAPS page whether you think this deal will bring a gusher of profits home.
With friends like these
TASER's recent announcement that some big international orders would be delayed bodes poorly for the stun-gun maker. The news leaves TASER relying upon its new text monitoring service and tactical computer business for future growth. Despite the CEO's reassurances that the company will ramp up production next year to forge revenue growth in the future, its two interim fallback businesses hardly seem like high-growth opportunities.
Yet most CAPS members think these expansions into new quarters offer great potential. CAPS' davidjsutton says a developing razor-and-blades model will also boost profits:
While the economy is rough the enforcement of law will require more use of devices like tasr supplies. They will switch to making a larger portion of profit on reloads and demand for the recording and evidence will greatly increase. These types of devices will soon out number or at least equal the number of fire arms for law enforcement in the next 5 years.
TASER reported that these cartridge sales accounted for 27% of total sales in 2009, up from 22% the year before. Let us know on the TASER CAPS page whether this shift will result in stunning new growth.
Have half a mind
Sign up today for the completely free CAPS service, and tell us whether these stocks are twice as good at half the price.
RSS Headlines
Fool UK