"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett
Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.
In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.
Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled this shopping list of potential picks, we'll check them against the collective intelligence of Motley Fool CAPS.
Today's contenders include:
|
Stock
|
Recent Price
|
CAPS Rating
(out of 5)
|
|
The Bank of Ireland (NYSE: IRE )
|
$10.71
|
****
|
|
Radian Group (NYSE: RDN )
|
$5.27
|
**
|
|
MBIA
|
$3.27
|
*
|
|
MGIC Investment
|
$4.40
|
*
|
|
Zale (NYSE: ZLC )
|
$5.05
|
*
|
Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.
Up on Wall Street, the pinstripe-and-wingtip crowd can't sell these stocks fast enough. They may be right. Down here on Main Street, we've given these same stocks a once-over, and we sure don't like what we see. Losses at Radian, MBIA, and MGIC. Losses and lawsuits at Zale -- what's there to like about that?
Seriously, that's not a rhetorical question today. As it turns out, CAPS members' top-ranked stock has no profit in the trailing 12 months, either.
The bull case for The Governor and Company of The Bank of Ireland
Aside from its highfalutin' moniker, is there any reason to like this bank? Well, there's the location: KosmoCobblepot calls Ireland an "[a]ttractive place to do business." (That's not exactly an unpopular view. We've had more than a few Fools express similar sentiments over the past few years.)
And according to oilresearchguru, writing in May: "As a big bank goes, so goes the country. ... this bank is the most solvent bank in Ireland."
Better yet, Bank of Ireland is about to get a whole lot more solvent. As joesly8 observed just a few days ago: "The Irish gov is about to pass their bailout plan. With this and possibly a little capital ... IRE [shares] are undervalued at about the same rate BAC (Bank of America) was back in march. Only wish I had bought these two along with my American banks then!"
Irish investors are smiling
Could it be true? Is IRE-land giving banking investors a second bite at the apple -- and a chance to buy the equivalent of a pre-rebound B of A? Just as we did a couple weeks ago, when Allied Irish made its appearance on the Fearful list, let's see how this latest Celtic contender stacks up against some more familiar competition:
|
Stock
|
Return on
Assets*
|
Return on
Equity*
|
Current Price-to-Tangible
Book Value
|
|
Bank of Ireland
|
0.9%
|
19%
|
0.3
|
|
Bank of America (NYSE: BAC )
|
1.2%
|
15%
|
1.4
|
|
Citigroup (NYSE: C )
|
0.9%
|
12%
|
0.9
|
|
JPMorgan Chase (NYSE: JPM )
|
0.7%
|
10%
|
1.7
|
|
Wells Fargo (NYSE: WFC )
|
1.5%
|
16%
|
2.5
|
*Average over the last 10 years. Data courtesy of Capital IQ, a division of Standard & Poor's.
So as it turns out, Bank of Ireland sports returns on assets smack-dab in the middle of the pack, and returns on equity that are second to none. Meanwhile, the price looks so tantalizingly low, relative to tangible book value, that it's hard not to conclude we've found a bargain.
Time to chime in
Of course, that's just my opinion. And I must admit that I'm the farthest thing from a banking expert ... but maybe you are?
I'm betting a few of you Fool readers out there know a whole lot more than I do about banks and their relative merits. And I'm hoping that you'll take a moment now to tell us what you think about Bank of Ireland. If you can spare the time, click this link, and tell us what you think.
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