I am always looking for a good deal, whether that means buying an extra box of Golden Grahams when they're on sale or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than its worth may seem silly, but legendary value investor Ben Graham (no relation to the cereal) tells us, by way of allegory, how we can look out for these situations.
In The Intelligent Investor, Graham introduces readers to a wacky chap named Mr. Market. Mr. Market's game is to pay you house calls on a daily basis to offer 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 and offer you premium prices for your holdings, while at other times he'll be inconsolably depressed about the future and will offer to sell you what he has for as low as pennies on the dollar.
So 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 |
|---|---|---|---|
|
China Digital TV |
(16.5%) |
(47.9%) |
**** |
|
Mueller Water Products |
(15.5%) |
(59.1%) |
***** |
|
Morningstar |
(4.1%) |
(40.1%) |
***** |
|
Emerson Electric |
(4.0%) |
(39.0%) |
***** |
|
Terex |
(3.6%) |
(79.8%) |
**** |
|
KHD Humboldt Wedag |
(3.3%) |
(75.1%) |
***** |
|
Akamai Technologies |
(3.0%) |
(44.2%) |
***** |
Data from Motley Fool CAPS as of June 1.
As the table shows, these stocks are all still 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 Akamai Technologies.
Why so blue?
The past month has seen the S&P 500 index climb more than 7% as investors have increasingly turned positive on the state of the economy. It's been an even better month for some major tech stocks, with chip maker Texas Instruments
The good news, though, is that nothing terrible happened to Akamai over the past 30 days. In fact, at the end of April, the company announced first-quarter earnings that topped analysts' estimates. It also got a chance to show off its balance sheet once again, which is flush with more than $800 million of cash and marketable securities.
So why the drop? Between November of last year and Akamai's first-quarter earnings release, the company's stock more than doubled. Since the stock's current price-to-earnings ratio in the upper 20s isn't exactly a bargain compared to the rest of the market right now, it's likely that investors are letting Akamai's stock cool off a bit.
What the bulls say
If you head over to Akamai's CAPS page, you'll find bulls aplenty -- 2,532 of them to be exact. Akamai fans have highlighted the company's strong cash flow, enviable balance sheet, and its position in the growing cloud-computing industry.
To get more specific on what CAPS members think, let's take a look at what All-Star PearlandTX said when giving Akamai a thumbs-up nearly two years ago:
Akamai dominates a highly specialized niche in the digital world. When you click on a web page and rich content is served up quickly, chances are that Akamai is the company making the fast delivery possible. Their customer list includes most of the premier online companies. ... Bottom line: Several powerful megatrends are working concurrently to create a powerful tailwind that propels Akamai forward.
So here's the question: Do you think the recent drop has created a good buying opportunity? Or will the stock need to cool off further? Let the community know what you think. Head over to CAPS and share your thoughts with the 135,000 other members. Even if you'd prefer to pass on Akamai, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.
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