"We simply attempt to be fearful when others are greedy
and to be greedy only when others are fearful."
-- Warren Buffett
Of all the Oracle of Omaha's orations, this one holds a special place in Foolish investors' hearts. When looking to bag a bargain, a panicked sell-off by jittery investors offers you a great chance to snap up stocks on the cheap.
In the short term, professional traders' pessimism can become a self-fulfilling prophecy. Desperate institutions lower their asking prices to get rid of a stock, prompting buyers' bid prices to fall in tandem, creating the very price decline that both sides feared in the first place -- until the selling stops.
Until it does, savvy investors can "get greedy," snapping up bargains from these fearful sellers. (Assuming they really are bargains.) In today's column, we'll see which stocks Wall Street's motivated sellers are most frantic to unload. Once we've compiled this shopping list of potential picks, we'll check them against the collective intelligence of Motley Fool CAPS.
Today's contenders include:
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Recent Price
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CAPS Rating
(5 max):
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inVentiv Health (Nasdaq: VTIV )
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$18.47
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*****
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|
Range Resources (NYSE: RRC )
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$42.20
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****
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W&T Offshore (NYSE: WTI )
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$34.79
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****
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Denbury Resources
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$22.98
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****
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|
Union Drilling
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$13.27
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****
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Companies are selected from the "Institutional Ownership Down Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price and CAPS ratings from Motley Fool CAPS.
My, how time flies. It seems like just yesterday that Wall Street's "wise" were telling us oil would gush ever upward. Yet today, with oil selling for just $115 a barrel (it's a bargain!), the professionals are tripping all over themselves to get out of the oil biz, and selling anything they can find with "drilling" or "resources" in its moniker.
Maybe we're optimists, or maybe we're just slow, but Main Street investors are taking oil's retrenchment with a bit more equanimity. Fact is, all four of the five oil plays listed above still enjoy above-average support on CAPS.
And yet, the stock scoring the big five stars on today's list is the only one not involved in hydrocarbon-sucking: inVentiv Health. Coincidentally, it's also the only Motley Fool stock recommendation on the list, a member of the Motley Fool Hidden Gems portfolio. But aside from that, here's why Fools like it:
The bull case for inVentiv Health
- CAPS member swanriverdaisy introduced us to this company back in 2006: "InVentiv had become a one-stop shop to provide any application that a pharmaceutical company requires ... in bringing a new drug to market. InVentiv provides pharmaceutical sales, marketing and clinical services spanning late-stage clinical through commercialization to over 150 pharmaceutical, biotech, specialty and emerging companies ... There is no competitor which is competitive for all of inVentiv's services. ... I think the fact that inVentiv is full service gives them a major advantage in the market they serve." (inVentiv's client list includes all the big names -- Johnson & Johnson (NYSE: JNJ ) , Pfizer (NYSE: PFE ) , Merck (NYSE: MRK ) , and GlaxoSmithKline (NYSE: GSK ) are all in there.)
- In December, CAPS All-Star intellivestor chimed in to suggest that: "Just looking at the macroeconomics of the impact of all of the baby boomers who will most likely require more medical treatment than the average economic class, the health care industry is posed for some lucrative returns in the coming years. Given [inVentiv] value proposition to help pharmaceuticals cut costs yet provide more value to the consumer, I think this is a stock taken notice."
- Plus, inVentiv was cheap back then -- or so said fellow All-Star Gtrinvestor, pointing out that the "5 year PEG is < 1, and next year's P/E is expected to be 16 ... For the past 3 1/2 years the company has continually grown sales, gross profit and earnings ... For the most part the company has continually generated positive cash flows from operations, requiring very little in capex. "
If inVentiv was cheap back then, then thanks to an ill-received earnings report last week, it's even cheaper today. The company grew its profits 70% in the second quarter, but warned that growth is already starting to slow as clients pare back their spending. That sparked a 20% sell-off in the shares.
And yet, based on management's new, pessimistic guidance, the shares still sell for only 15 times this year's projected earnings. Relative to Wall Street's expectation that inVentiv will grow better than 24% per year going forward, that's not just "cheap." That's dirt cheap.
Time to chime in
Of course, the aim of this column isn't just to tell you what I think about inVentiv Health -- or even what other CAPS members are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.
Motley Fool CAPS: It's fun, it's free, and it just might make you famous.
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