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
|
| Genco Shipping (NYSE: GNK ) |
*****
|
52%
|
| Longwei Petroleum Investment (NYSE: LPH ) |
****
|
50%
|
| Wonder Auto Technology (Nasdaq: WATG ) |
*****
|
54%
|
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
The dry-shipping vessel glut caused Korea's second largest dry bulk shipper to declare bankruptcy, causing waves of distress throughout an industry already beset by plummeting dayrates. The worst hit was Eagle Bulk Shipping (Nasdaq: EGLE ) , which leased more than a quarter of all its vessels to Korea Line, and several others were swamped in its wake. While Genco Shipping was not exposed to the Korean crisis, it's still taking on water because of the falling prices for capesize ships.
The change in industry fortunes is causing some shippers to look elsewhere for business. Diana Shipping (Nasdaq: DSX ) , believes that so long as the economy continues to expand, branching out into container shipping will allow it to boost utilization rates for its fleet.
Considering its depressed valuation, CAPS member unlearned thinks there's the potential to get in at a significantly discounted price.
Shipping is a big thing for every market. This company is trading at a discount to book value and has strong margins and a small debt load. As the economy recovers this company will be poised to make a large move.
Let us know in the comments section below or on the Genco Shipping CAPS page whether investor should go aboard this dry bulk shipper at its current price.
A reserve player
After a blistering IPO debut, Longwei Petroleum Investment has becoming according to CAPS wag TrekRider59 "Wrong Way Petroleum." Like many other investors examining Chinese small cap stocks, he's got a lot of concerns about Longwei's business.
I'm not seeing this company the long way anymore, in fact I'm certain they're doing things the wrong way. I'm even wondering if the company could be a scam. This $50MM shelf is making me very nervous about LPH and I won't buy back in until the cash starts to pile up (which is looking like it could be some time off). By that point, the PPS will either be astronomical or washed out as a scam. Either way, it's looking like I'm out for good.
Whether it's a scam remains to be seen, but management's grasp of supply and demand seems to be in doubt. Cheering China's second oil price increase in two months as a means for it to boost revenues and profits, Longwei seems to lack an understanding that higher prices also means reduced demand, and that's the real reason China is pushing through price hikes. It's also hardly an environment conducive to long-term growth.
Longwei's stock is down 13% so far this year, but you can follow its education by adding it to the Fool's free portfolio tracker.
On the level
Using Longwei's thinking, Wonder Auto Technology should be swimming in cash soon. As a result of rising oil and gas prices, Beijing is going to increase taxi fares in the city. While city officials realize it may work against its efforts to ease congestion (see, Longwei, that's what rising prices do), it needs to offset the higher costs they're seeing.
With Wonder, SORL Auto Parts (Nasdaq: SORL ) , and China Automotive Systems (Nasdaq: CAAS ) all down 15% or more year to date, we can probably expect their fortunes to reverse as the cost of everything rises. In reality, China eliminated last year the tax breaks buyers of small cars enjoyed while reimposing a 10% tax that began on January 1. Wonder will increasingly need to look to international markets to expand sales, something CAPS All-Star kidderpeabodyny sees as likely to boost results.
Alternators, starters, airbags, seatbelts, electric vehicle taxi parts/patents PLUS China to be a growing force in their share of the growing worldwide demand for autos. Great long term hold!
Add Wonder to your watchlist, then drive over to the Wonder Auto Technology CAPS page and tell us how big an opportunity this could be.
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.
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