I'm always looking for a good deal, whether that means buying an extra box of Cocoa Puffs 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 tells us, by way of allegory, how we can look out for these situations.
In The Intelligent Investor, Graham introduces readers to a wacky guy named Mr. Market. He pays you house calls on a daily basis, offering 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, offering you premium prices for your holdings. At other times, he'll be inconsolably depressed about the future, offering to sell you his own holdings 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
|
|
Inverness
Medical Innovations (AMEX:IMA)
|
(35.0%)
|
(33.5%)
|
****
|
|
Sunrise
Senior Living (:SRZ)
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(30.7%)
|
(49.9%)
|
*****
|
|
Perficient (:PRFT)
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(30.6%)
|
(64.7%)
|
****
|
|
GigaMedia (NASDAQ:GIGM)
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(23.0%)
|
18.3%
|
*****
|
|
Foster Wheeler (NASDAQ:FWLT)
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(22.6%)
|
100.6%
|
*****
|
|
China
Medical Technologies (NASDAQ:CMED)
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(22.1%)
|
73.3%
|
*****
|
|
Focus Media (NASDAQ:FMCN)
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(19.7%)
|
3.9%
|
*****
|
Data from Motley Fool CAPS as of March 18.
As the table shows, these stocks remain 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 Sunrise Senior Living.
Why so blue?
On Tuesday, Sunrise dealt investors a body blow by announcing that it wasn't going to be able to meet the NYSE's extended deadline for filing its 2006 10-K, which may banish its stock to the Pink Sheets.
While the announcement sent the stock diving 15%, it was only the most recent chapter of the ongoing troubles at Sunrise. Back in early 2006, Sunrise announced that it was looking into accounting practices relating to some of its joint ventures. The scope of the accounting review widened, descending into a quagmire that has kept the company busy to this day trying to restate its results from 1996 to 2005. In the midst of the accounting review, the company also had to examine its stock options practices -- an investigation that resulted in the firing of Sunrise's CFO.
Sunrise was even trying for a while to find "strategic alternatives" -- Wall Street talk for a company trying to sell itself -- but that process hasn't yielded any fruit. Meanwhile, the company has not been able to file any full, up-to-date financials for its current operations, which has put it in hot water not only with the NYSE, but also with its lenders.
What the bulls say
Despite the accounting troubles, Sunrise's business seems to be trucking along. The company continues to open new communities and now operates 457. Occupancy rates in Sunrise's same-community portfolio have fallen slightly, but remain above 90%, while the company's overall revenue under management increased by 8% in 2007 to $2.4 billion.
The stock has a strong following on CAPS, particularly among CAPS' All-Stars, where it has been pegged an outperformer by all 80 that have rated it. All-Star jmulcahy047 summed up the opportunity in one word: "Boomers!" TheGrtGdOM, another Sunrise bull, agreed on the baby boomers theme, and added that the potential downside from the accounting issues may already be baked into the current stock price.
So do you think the recent drop has created a good buying opportunity? Or is there more downside ahead? Let the community know what you think -- head over to CAPS and share your thoughts with the 89,000-plus players currently part of the community. Even if you'd prefer to pass on Sunrise Senior Living, you can check out a couple of the other stocks listed above or any of the more than 5,500 stocks that are rated on CAPS.
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