I am always looking for a good deal, whether that means buying an extra box of Frosted Flakes 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 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 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 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 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 |
|---|---|---|---|
|
Aluminum Corp of China |
(31.6%) |
(30.9%) |
***** |
|
Navios Maritime |
(28.7%) |
(15.1%) |
***** |
|
Cemex |
(22.2%) |
(35.4%) |
***** |
|
Veolia Environnement |
(21.9%) |
(27.6%) |
***** |
|
Netgear |
(20.5%) |
(59.9%) |
***** |
|
Titanium Metals |
(17.3%) |
(54.9%) |
***** |
|
Ceragon Networks |
(16.6%) |
(22.1%) |
***** |
Data from Motley Fool CAPS as of June 24.
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 Motley Fool Global Gains pick Cemex.
Why so blue?
In case you hadn’t noticed, the U.S. housing market hasn't been doing so well lately. Not that you can really escape that fact, since it seems that everywhere you turn, some newscaster or expert is talking about the market’s plunge. At this point, I'm starting to feel the same about the foreclosure crisis as I do about Paris Hilton -- I'd be pretty psyched if I never heard another word about either one again.
Unfortunately, it appears that neither Cemex nor I will be granted such a luxury. And while the mindless drivel about Ms. Hilton has little impact on Cemex's business, the battered U.S. real-estate market does.
Though it's no secret that the market has been putting pressure on Cemex, the company recently noted that the decline is more than it had originally anticipated, and it cut its outlook for the soon-to-be-concluded second quarter. Adjusting for last year's acquisition of Rinker, Cemex expects that second-quarter sales will be up 4%, but EBITDA will fall by 2%.
What the bulls say
The average Wall Street outlook for a stock is usually only six to 12 months, which means that the Street’s perspective is all trees and no forest. In the case of Cemex, a pessimistic period like this could be a good time to snap up shares while most investors are steering clear. Though business may be hurting right now, the market for building products like cement, concrete, and aggregate isn't going anywhere over the long term, and through moves like the Rinker acquisition, Cemex has positioned itself as a market leader.
CAPS players have been of a similar mind; more than 3,500 of the 3,600 players who have rated the stock have tagged it as an outperformer. CAPS All-Star Capsperson was one of Cemex's supporters, noting an appreciation for the company's broad geographic presence:
Excellent management has put [Cemex] in great position. With operations in more than 50 countries and very smart acquisitions, [Cemex] has the advantage of locating its production close to its demand which is expected to grow by 4% annually for some years. By locating production close to demand, they have automatically hedged against currency fluctuations. Competition feels the barrier to entry into this market because of transportation costs.
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 110,000-plus players currently part of the community. Even if you'd prefer to pass on Cemex, you can check out a couple of the other stocks listed above or any of the 5,500 stocks that are rated on CAPS.
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