I'm always looking for a good deal, whether that means buying an extra box of cereal when it's on sale or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than it's worth may seem silly, but it happens, and legendary value investor Ben Graham tells us, by way of allegory, how we can look out 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 sell interests in businesses he owns or buy interests in businesses you own. Sometimes, Mr. Market will show up at your door very excited and offer you premium prices for your holdings, and 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.
So 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 earned a five-star rating, the highest possible, among our community of investors just 30 days ago.
|
Stock
|
30-Day Return
|
One-Year Return
|
Current CAPS Rating (Out of 5)
|
|
Hurco (Nasdaq: HURC )
|
(26.2%)
|
(25.2%)
|
*****
|
|
ChinaMobile (NYSE: CHL )
|
(17.2%)
|
59.8%
|
****
|
|
Vivo Participacoes (NYSE: VIV )
|
(14.7%)
|
25.8%
|
*****
|
|
Telkom Indonesia (NYSE: TLK )
|
(14%)
|
(23%)
|
*****
|
|
Smith Micro Software (Nasdaq: SMSI )
|
(13.2%)
|
(50.9%)
|
*****
|
|
Giant Interactive (NYSE: GA )
|
(11.6%)
|
NA*
|
*****
|
|
Sierra Wireless (Nasdaq: SWIR )
|
(10.3%)
|
(23.3%)
|
****
|
Data from Motley Fool CAPS as of June 3. NA = not applicable.
*Giant Interactive opened for trading Nov. 1, 2007.
As the table shows, the CAPS community still holds these stocks in high regard, despite their underperformance over the past month. These are not formal recommendations, but they could be a great place to kick off some further research. I'll even get you started with some thoughts on China Mobile.
Why so blue?
Picture the scene: It's the beginning of the 1996-97 basketball season, and David Stern has called Michael Jordan to meet with him.
"Mike," he says, "you just led the Bulls to a fourth title and a record 72 regular season wins. That's great … that's fantastic."
"However," he continues, "we think you've gotten too good -- you're head and shoulders above the rest of the NBA, and we need to see some more competition so the fans don't get bored. So we're going to allow Charles Barkley to start taking steroids, and the three-point line is going to be moved in for John Stockton."
And then the capper: "Meanwhile, we're putting five-pound weights in your shoes."
If you can imagine the look on His Airness' face in this fictional story, then you probably have some idea how executives and investors at China Mobile feel. Late last month, the Chinese government announced a sweeping restructuring of the fixed-line and mobile telecom industry in the country that will pave the way for the long awaited 3G licenses -- and create a more competitive environment.
Without diving too far into the quagmire here, I'll just say that the plan is pushing through significant consolidation in the industry. The hope is to create three major telecom players that will be locked in heated competition, much like what we see with the telecom industry here in the United States. Although there are a lot of positives to this plan, China Mobile -- which currently has a stranglehold on the largest mobile telecom base in the world -- gets the raw end of the deal. Investors, spurred on by dour reactions from Wall Street analysts, have been fleeing the stock since the restructuring was announced.
What the bulls say
We know the restructuring affects China Mobile's value. The question is by how much. After all, it's still a great business operating in a huge market.
On CAPS, more than 2,700 players that think China Mobile will outpace the S&P 500 versus just 91 that think it will get beaten by the index. Far from being scared off, many players jumped on the stock after the reaction to the restructuring. CAPS All-Star Woofola, for instance, recently gave China Mobile a thumbs-up and wrote: "[China Mobile has] strong financial fundamentals ([return on equity], Cash, Debt/Equity, etc). Recent drop (May 2008) due to changes in competitive landscape is overrated in my view, as I expect [China Mobile] to continue dominating and growing market share for many years to come while China Telecom + [China] Unicom tries to catch up."
So do you think the recent drop has created a good buying opportunity? Or is there more downside ahead? Let the community know what you think -- head over to CAPS and share your thoughts with the other 105,000-plus players that are currently part of the community. Even if you'd prefer to pass on China Mobile, you can check out a couple of the other stocks listed above or any of the 5,600 stocks that are rated on CAPS.
More CAPS Foolishness:
RSS Headlines
Fool UK