I'm 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. 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, promising you premium prices for your holdings. At other times he'll be inconsolably depressed about the future, and will want to sell you what he has 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 sported a maximum five-star rating from our community of investors just 30 days ago:
|
Stock
|
30-day return
|
One-year return
|
Current CAPS rating
|
|
McDermott International (NYSE: MDR)
|
(49.6%)
|
(82%)
|
*****
|
|
Clean Energy Fuels (Nasdaq: CLNE)
|
(48.6%)
|
(72.9%)
|
****
|
|
Silver Wheaton (NYSE: SLW)
|
(31.3%)
|
(77.6%)
|
*****
|
|
Morningstar (Nasdaq: MORN)
|
(30.8%)
|
(53.4%)
|
*****
|
|
Mobile Telesystems (NYSE: MBT)
|
(25.9%)
|
(67.9%)
|
****
|
|
Middleby (Nasdaq: MIDD)
|
(22.6%)
|
(50.4%)
|
*****
|
|
China Medical Technologies (Nasdaq: CMED)
|
(21.6%)
|
(39.5%)
|
*****
|
Data from Motley Fool CAPS as of Nov. 11.
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 some further research. I'll even get you started with some thoughts on Middleby.
Why so blue?
When it comes to the stock market, blue is the new black lately. Or wait, is black-and-blue the new black? Either way, it's tough to find a stock that's not singing the blues right now.
Though part of Middleby's decline has come as the rest of the market has sold off, some has been the company's own doing. A major element of Middleby's success over the past few years was its opportunistic purchases of smaller companies with complementary products that expanded Middleby's presence in professional kitchens. That strategy, though, has ruffled some investor feathers lately, as the company gets ready to complete the acquisition of loss-producing TurboChef.
Meanwhile, Middleby's balance sheet had been starting to look pretty good, but the recent hefty helping of debt now makes it look like... well, let's just say it has a good personality.
What the bulls say
The proof may be in the pudding when it comes to the TurboChef acquisition, but if anyone can pull it off, Selim Bassoul is the guy to do it. Since taking over the CEO spot back in 2001, Bassoul has wowed investors and analysts as he has turned the company around and made it a formidable competitor in its industry. And though the debt level should be watched, particularly after the close of the TurboChef acquisition, at the end of the third quarter the company still had interest payments well-covered.
But I don't have to sell the CAPS community on the merits of Middleby. Nearly 97% of all CAPS members that have rated the stock have called it an outperformer. In late October, CAPS All-Star sandvig rated Middleby an outperformer and quipped: "Omnes lagani pistrinae gelate male sapient - All frozen pizzas taste lousy. People will keep dining out - restaurants will keep buying ovens."
And on a more serious note, fellow Middleby bull brownboddington added:
No reason to think [Middleby] cant do with [TurboChef] what it has already done with other acquisitions. I like the fact that [Middleby] is focused on cost saving technology for its customers. This should keep it relevant, even in a slowdown.
So do you think the recent drop has created a good buying opportunity? Or will Middleby's debt hold it down? Let the community know what you think -- head over to CAPS and share your thoughts with the other 120,000-plus players currently part of the community. Even if you'd prefer to pass on Middleby, you can check out a couple of the other stocks listed above, or any of the 5,400 stocks currently rated on CAPS.
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