"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 bath water.
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.
- Estimates of profitability in 2009.
- Terrible performance over the past 52 weeks. Yes, almost every stock meets this condition, but I'm looking for the bargain opportunities -- solid companies with great outlooks that are being valued like total losers.
Have a look:
|
Company
|
52-Week
Price Change
|
Recent Price
|
2009 Earnings Estimates
|
|
Arch Coal (NYSE: ACI )
|
(76%)
|
$18.66
|
$0.45
|
|
Chesapeake Energy (NYSE: CHK )
|
(61%)
|
$23.39
|
$2.07
|
|
Procter & Gamble (NYSE: PG )
|
(18%)
|
$53.35
|
$4.22*
|
|
Netgear (Nasdaq: NTGR )
|
(18%)
|
$15.02
|
$0.30
|
|
NYSE Euronext (NYSE: NYX )
|
(50%)
|
$30.00
|
$1.84
|
Data from Motley Fool CAPS and Yahoo! Finance, as of June 4, 2009.
*For fiscal year ending June 30, 2009.
None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can run an update of this screen yourself, if you'd like.
Buy buy buy! Sell sell sell!
Volatility has been off the charts lately and shows little sign of letting up. While it makes most investors nauseated, it can be a boon for companies like NYSE Euronext that snip small profits from frantic trading. As TMFZahrim wrote last year:
Hyperactive markets mean lots of trading, and the NYSE takes a cut of every trade. That's why this crisis is great news for the exchanges themselves. Their stocks should follow suit eventually.
But that, while extremely beneficial, might be the least of this company's catalysts going forward. The stock exchange business, you see, is staggeringly hard to get into. NYSE Euronext, Nasdaq OMX (Nasdaq: NDAQ ) , and CME Group (NYSE: CME ) are the domestic title-holders, and it's nearly impossible to compete against them. You can't exactly start a trading floor in your basement and hope for great success. Competition from new entrants is scarce. This gives the exchange industry monopolistic powers and gives investors a very nice moat to rely on.
And what's great about these competition-repelling moats is that you can be relatively certain where business will land when things rebound. In this case, if you want to take a company public in the United States, you essentially have two options: NYSE Euronext or Nasdaq. With pent-up demand brewing as the economy falters and uninviting markets suspend plans, NYSE Euronext could undergo a boomlet of new offerings in the years ahead. This appears to be the theory that intrigues CAPS member TMFBreakerTAllan, who wrote:
When markets go bad, the market still makes a fee. There has been a dearth of IPOs in the past few years and when the current recession ends, both NYX and NASDAQ will explode with revenue. In the meantime, NYX has the volume to support revenues and has a steady stream of additional income as ETFs become more and more prevalent on the markets.
With shares trading at roughly 16 times forward earnings, you're not paying the ultra-premium multiple a company like this deserves to reflect the advantages of operating in an industry with monumental barriers to entry.
Foolproof investment? No. But it looks like a compelling bet to me.
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