"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
-- Warren Buffett
Can't argue with that, can you? I don't need to remind you of how much fear is in the market these days. It's a real gut check, but that fear is creating opportunities for investors patient and diligent enough to search for the babies thrown out with the bathwater.
Using our Motley Fool CAPS ranking system's screening tool, I scanned for bargain companies with the following characteristics:
- Five-star ratings -- the highest our CAPS community offers.
- Trailing dividend yields of at least 3%.
- Price-to-book ratios no greater than 1.
- Dreadful performance over the past 26 weeks. Yes, almost every stock meets this condition, but I'm looking for the biggest of the big. The complete capitulators. The mothers and fathers of all bargains.
Among others, I dug up these five, which have been shredded so far it's hard to keep ignoring 'em:
|
Company
|
26-Week
Price Change
|
Dividend
Yield
|
Price/Book Ratio
|
2009 Earnings Estimates
|
|
ArcelorMittal (NYSE: MT )
|
(69%)
|
3.1%
|
0.45
|
$2.12
|
|
Carpenter Technology (NYSE: CRS )
|
(57%)
|
5.1%
|
0.80
|
$2.32
|
|
Eaton (NYSE: ETN )
|
(55%)
|
6.2%
|
0.84
|
$3.68
|
|
NYSE Euronext (NYSE: NYX )
|
(56%)
|
3.9%
|
0.51
|
$1.90
|
|
Valero (NYSE: VLO )
|
(52%)
|
3.5%
|
0.45
|
$2.96
|
Data from Motley Fool CAPS and Yahoo! Finance, as of March 12, 2009.
None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can rerun an update of this screen yourself, if you like.
Betting on black gold
Good news for energy stocks: Oil is finally starting to stabilize and gasoline prices have been on the rise. No one's calling a bottom, but the inevitable rebirth of energy markets seems to be gaining some traction.
That's good news for stocks like Valero, which has been blasted to pieces over the past year. As CAPS member BSHumphreyll wrote back in January:
At 4 times earnings, Valero is priced like everyone in the world is going to be plugging in a Chevy Volt next month. Barring that unlikely occurrence, I think it's a safe bet that gasoline prices have bottomed, and so has this stock.
With General Motors (NYSE: GM ) hanging on for dear life, no, I don't think the widespread use of electric cars is a very likely occurrence in the short term. What is likely is that healthier energy demand -- some forecasters like T. Boone Pickens see oil back above $75 before year's end -- and wider crack spreads will continue to help Valero and competitors like Tesoro (NYSE: TSO ) regain some of their former spark. I appreciated the brevity of CAPS member Tenki2009, who recently wrote, "Increased refinery margins with low oil prizes. Oversold stock." I'll second that one.
Steel of a deal
Speaking of oversold, anyone else checking out the left-for-dead prices of metal stocks these days? I understand the global economy is in a coma, but stocks like ArcelorMittal are trading like metal is a passing fad that’s been thrown out the window like a dot-com bubble stock. The steel giant has plunged 73% in the past year, and now has a market cap equal to the last three years' profits.
And while its potential is a sliver of what it was when the global economy was building itself to death, things probably aren't nearly as doomed as the market's making them out to be. As CAPS member blink182fan recently wrote:
Among the steel producers, [ArcelorMittal] has the strongest current ratio and cashflow for its size. It also has the largest exposure to … all major and emerging markets across the globe, notably China.
If you have patience to stick it out, steel stocks that have been blown to shreds lately might be some of the biggest winners in the years ahead, especially if global stimulus packages start to gain traction.
Your turn to chime in
What do you think about Valero, ArcelorMittal, or any other stock for that matter? More than 130,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.
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