I am always looking for a good deal, whether that means buying an extra box of Lucky Charms 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 tells us, by way of allegory, how we can look for these situations.
In The Intelligent Investor, Graham introduces readers to a wacky guy 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 totally 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 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
|
|
ViroPharma (Nasdaq: VPHM)
|
(26%)
|
(15%)
|
*****
|
|
Matrix Service
|
(22%)
|
48.4%
|
*****
|
|
Nabi Biopharmaceuticals (Nasdaq: NABI)
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(20.2%)
|
(39.9%)
|
****
|
|
Mobile Mini (Nasdaq: MINI)
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(19.2%)
|
(13.3%)
|
****
|
|
Golden Star Resources
|
(14.8%)
|
(7.2%)
|
*****
|
|
Suntech Power (NYSE: STP)
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(14.7%)
|
21.3%
|
*****
|
|
Hercules Offshore (Nasdaq: HERO)
|
(13.1%)
|
(20.3%)
|
*****
|
Data from Motley Fool CAPS as of Aug. 28, 2007.
As the table shows, all these stocks are 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 ViroPharma.
C ViroPharma fall
When a biopharma company like ViroPharma takes a tumble, it's usually a safe guess that testing of a new drug went poorly. And this was the case with ViroPharma's early August dive.
On Aug. 10, ViroPharma's stock dropped as much as 27% before shoring up a bit and closing down 15% from the prior day. The reason was the announcement that the company was discontinuing the phase 2 trial of its hepatitis C drug, dubbed HCV-796, which ViroPharma had been working on in conjunction with Wyeth (NYSE: WYE). The drug trial revealed that patients being treated with HCV-796 had higher levels of liver enzymes -- typically a warning sign that something is going wrong in the liver.
Though a single drug can be the whole story in some young biopharma companies, this isn't the case with ViroPharma. The company is profitable thanks to the drug Vancocin, a treatment for pseudomembranous colitis that it acquired from Eli Lilly (NYSE: LLY). It also has another drug in phase 3 trials -- Maribavir, which treats cytomegalovirus. And let's not overlook the fact that ViroPharma is sitting on a combined $517 million of cash and short-term investments, and it has made it known that it will be looking at acquisitions.
Of 157 CAPS All-Stars -- players ranked in the top 20% of all 60,000-plus CAPS players -- to weigh in on ViroPharma, 155 expect the stock to outperform the market. One of those All-Stars, nickinglis, slapped on the thumbs-up a few days after the HCV-796 report came out, saying there had been a "market over-reaction on bad news" and that a correction is still on the way.
So, does the drop create a good buying opportunity? Or does the HCV-796 disappointment warrant the new, lower price? Let the community know what you think -- head over to CAPS and share your thoughts. Even if you'd prefer to pass on ViroPharma, you can check out a couple of the other stocks listed above or any of the 4,900 stocks that are rated on CAPS. (If you were waiting, consider this your engraved invitation to join CAPS.)
More CAPS Foolishness:
Suntech Power is a Rule Breakers selection. Eli Lilly is an Income Investor pick. Hercules Offshore is a member of the Motley Fool Hidden Gems list, and Mobile Mini is a Stock Advisor pick. Sign up for a 30-day free trial of any of the Fool's newsletters.
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out Matt's CAPS portfolio here. The Fool's disclosure policy once formulated a drug to cure an ailing portfolio. Unfortunately, it didn't work correctly and gave it an enhanced sense of smell instead. Is somebody baking brownies?
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