3 Top Stocks at Half-Price

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

China Sky One Medical (Nasdaq: CSKI  )

****

59%

DRDGOLD (Nasdaq: DROOY  )

****

55%

Dynegy (NYSE: DYN  )

****

73%

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 in to your portfolio.

Take two, they're small
China Sky One Medical wants to bring traditional Chinese medicine to Western markets. Unlike American Oriental Bioengineering  (NYSE: AOB  ) , which focuses solely on the China market (though it does say it has plans for international growth one day), China Sky One has a two-pronged approach to marketing its over-the-counter medicines, with international sales representing almost 8% of revenues.

Still, the Chinese market remains its principal focus, and that's not surprising considering the opportunity it represents. But it's also laboring under the same fears investors have regarding several other Chinese companies that have come under scrutiny for opaque financial reporting. A noted short-seller has been highly critical of China Sky's accounting practices and that has sown seeds of doubt.

With investors in Fuqi International (Nasdaq: FUQI  ) still reeling from the taint of impropriety, they're right to wonder whether Chinese companies can be trusted. kahakaiBum admits to such skepticism, but thinks avoiding a full position will alleviate any misgivings:

I am treading lightly when it comes to China right now. The China fear may hold this one (and a few other China small caps) back for a while.

A reserve player
While it might be down from its highs, gold remains at significantly elevated levels, and miners are generally trading at much higher price points than they were a year ago. Eldorado Gold is up 71%, Northgate Minerals (NYSE: NXG  ) is up 34%, and even Yamana Gold has kept itself in positive territory.

In contrast, DRDGOLD is one of the worst-performing gold miners with shares down more than 40% year over year. It has been plagued by problems, including the closing of its East Rand Proprietary Mines and the placement of its Blyvoor mine under judicial management. South African gold production also fell 6% last year, but Blyvoor returned a profit and output increased, giving it a good chance for future growth. That's good enough for llgrout, who says with DRDGOLD's new lower price, it represents an attractive opportunity.

With friends like these
Despite going into a tailspin of its own, utility Dynegy has still laughed at Wall Street's expectations for it has topped analyst forecasts through a series of energy hedges. But hedging isn't growth, and today's gross domestic product numbers should give investors pause about whether Dynegy can bounce back.

Real GDP growth fell further than anticipated, coming in at just 2.4% growth. This suggests the recovery we've been told was under way actually peaked in the fourth quarter of 2009 and may quickly fall into contraction once again. This "recovery summer" President Barack Obama keeps going on about is being revealed as a myth.

Yet if economic growth is stagnating, that won't bode well for Dynegy, Duke Energy (NYSE: DUK  ) , or Exelon, but that hasn't stopped the overwhelming majority of CAPS members rating Dynegy to outperform the broad market averages. Why not plug into the Dynegy CAPS page and tell us whether it has the power to grow?

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.

Exelon is a Motley Fool Inside Value pick. Duke Energy is a Motley Fool Income Investor selection. Motley Fool Options has recommended writing puts on Exelon. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 10, 2010, at 6:15 PM, arbyh wrote:

    Based on the quarterly report of far less earnings this article along with a number of others from here could very well be "pump and dump" tactics.

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