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 a pair of 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.
CAPS Rating (out of 5)
% off 52-Week High
|Silvercorp Metals (NYSE: SVM )||****||58%|
|United States Steel (NYSE: X )||****||57%|
Source: Motley Fool CAPS.
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.
Shady short-sellers -- and, no, that's not a redundant term -- may have been knocking down shares of Silvercorp Metals by almost half last year, but the silver miner has been working hard to correct what it says are misrepresentations and falsehoods. It spent $1.5 million on an internal investigation, which came up with nothing (not surprising, really), but now it's also hiring two well-known consulting firms to prepare an NI 43-101 report to lend more credibility to its mineral assessments.
NI 43-101s govern the way mining companies report scientific and technical information about their projects. Rubicon Minerals (NYSE: RBY ) saw its shares skyrocket after its report initially indicated it was sitting on vast wealth at its Red Lake district project. And Rare Element Resources saw similar advantage in releasing its results recently.
Although they were beneficial, Rubicon ended up revising downward the estimates of resources in the original report. Rare Element's data is based on less than half the holes drilled during last year's drill program. Expect revisions there, too. But for Silvercorp, it would represent the start of a confidence-building program that should quell doubts investors hold.
How big is big?
Steel giant United States Steel may have nearly a quarter of its shares sold short as well, but that has more to do with the global financial situation and China's slowing economic engine than with investors spreading rumor and innuendo. Indeed, steel scrapper Schnitzer Steel Industries (Nasdaq: SCHN ) just reported a 61% drop in profits as the European debt crisis sapped demand and led to a sharp decline in prices.
Last year actually turned out much better than it otherwise might have as the auto industry recovered, particularly Ford and GM. According to the American Iron and Steel Institute, there was an estimated 8% increase in the amount of raw steel produced in 2011, and Reuters reported that China's expecting only a 4% rise in consumption as its real estate industry looks ready to crumble just as hard as it did here in the U.S.
Those kinds of factors led short-sellers to load up against some of the top names in steel. AK Steel also has almost 22% of its shares sold short. Nevertheless, CAPS member mitleg is looking for U.S. Steel to rebound in 2012.
X has been a disaster for most of 2011. In real life I sold it about 20 points ago, with a nice profit. It has been positive for the last month or so. I think it has bottomed and could come back nicely.
Tell us on the United States Steel CAPS page or in the comments section below whether investors need to steel themselves for a repeat performance, and then follow its progress by adding it to your watchlist.
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. Although metals and mining may have upside potential, check out The Motley Fool's brand-new report, "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. You can get instant access to the name of this company by clicking here -- it's free.