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 who pays you house calls on a daily basis. He's always offering to sell you interests in businesses he owns, or to buy interests in businesses you own. Sometimes Mr. Market will show up at your door very excited, offering you premium prices for your holdings. 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.
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 maximum five-star rating by our community of investors just 30 days ago:
|
Stock
|
30-day return
|
One-year return
|
Current CAPS rating
|
|
Cogo Group
|
(25.4%)
|
(56.5%)
|
****
|
|
Giant Interactive
|
(9.0%)
|
(48.3%)
|
*****
|
|
GigaMedia (Nasdaq: GIGM )
|
(10.6%)
|
(64.4%)
|
*****
|
|
Netgear (Nasdaq: NTGR )
|
(10.3%)
|
(25.8%)
|
*****
|
|
Sun Hydraulics (Nasdaq: SNHY )
|
(11.1%)
|
(60.1%)
|
*****
|
|
Global Industries (Nasdaq: GLBL )
|
(3.8%)
|
(63.4%)
|
*****
|
|
Fortune Brands (NYSE: FO )
|
(18.1%)
|
(50.4%)
|
*****
|
Data from Motley Fool CAPS as of May 27.
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 Sun Hydraulics.
Why so blue?
Thanks to the global financial crisis and recession, construction has tailed off considerably. With construction off, the sales of heavy machinery from folks such as Caterpillar (NYSE: CAT ) and Deere (NYSE: DE ) have also taken a hit. And with heavy machinery sales down, turnover at companies such as Sun Hydraulics, which manufacture heavy machinery components, is suffering.
Earlier this month, Sun Hydraulics announced first-quarter results that were far from impressive. Sales for the quarter dropped 49%, while net income took a much harder 92% tumble. And the company doesn't expect the second quarter to be any prettier -- it's anticipating a 60% year-over-year drop in sales and an unprofitable bottom line.
What the bulls say
But that first-quarter report wasn't all gloom and doom for Sun Hydraulics. Its $0.03 in earnings per share topped the $0.01 that Wall Street analysts had been expecting. The company's CEO also had some encouraging comments to share, including touting the company's strong cash position and the positive momentum in the Purchasing Manager's Index.
I'm already a Sun Hydraulics bull on CAPS, but I'm far from alone. In all, 1,426 CAPS members have weighed in on the stock, and 1,415 of them have given it a thumbs-up. In late April, CAPS member clutedog joined the Sun Hydraulics fan club, issuing an outperform rating before writing:
Strong sales growth...just under everyone's radar. Good management and new growth in China as well as taking advantage of the stimulus package here should provide this company with $$$ down the road.
So here's the question: Do you think the recent drop has created a good buying opportunity? Or will the global slump continue to wear down the company? Let the community know what you think -- head over to CAPS and share your thoughts with the other 130,000 members currently part of the community. Even if you'd prefer to pass on Sun Hydraulics, 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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