"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 (out of 5):
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Teck Cominco (NYSE: TCK )
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$3.58
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*****
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THQ Inc (Nasdaq: THQI )
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$3.62
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**
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James River Coal (Nasdaq: JRCC )
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$5.98
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**
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Canadian Solar (Nasdaq: CSIQ )
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$4.06
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**
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Citigroup (NYSE: C )
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$3.77
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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 provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.
So what is it that's giving Wall Street the willies this week? Citigroup, of course. I've received more than one inquiry in my email inbox already this weekend, wondering if the megabank will "pull a Lehman" and go kaput. Other investors are predicting a flameout in the solar industry. And coal may be in trouble as well, as its viscous energy analog revisits price levels not seen in four years.
Curiously, the one stock that most everyone agrees remains a bargain touches on many of the same things that make Wall Street nervous. Today's top stock for greedy investors looking to capitalize on Wall Street's fear is Teck Cominco -- which digs up the gold that bankers love, as well as metallurgical coal and a host of other metals and minerals lying 'neath the earth. Why do CAPS members like this unlikely favorite? We're about to find out, as we dig into ...
The bull case for Teck Cominco
- CAPS All-Star MysterInsidious lays out a macro thesis in Teck's favor: "Oil, gas, and most commodities in general have been sold off hard due to recession fears, hedge fund redemptions, margin calls, and unwinding of the yen carry trade. Despite the US government printing money to help save the US economy, the dollar's value has increased significantly against most world currencies with the exception of the yen. I believe the unwinding of the carry trade has helped to push prices of commodities and anything related to commodities too far. Once these negative pressures are exhausted, I believe the US dollar will go back to declining in value ... When this happens, I expect all commodities to significantly increase in value."
- Which sounds great for "commodities." But what about Teck Cominco in particular? rustynail007 digs into the company's business, and comes up with the following micro thesis for the stock: "Teck Cominco is Canada's largest smelter of Zinc. Lead, and other minerals. Plus it has Fording Coal & that will close this yr. Plus it is a big player in the Oil Sands now & along with other mining companies that are producing Gold, Silver, Zinc, and other minerals... it is a screaming buy for long term buyers right now!"
- In closing, let's end with a slightly less emotional analysis from the Fool's own TMFSinchiruna, who has penned a series of articles describing the stock's ups and downs -- "Teck Makes a Powerful Purchase," "Colossal Growth, Hefty Dividend," and "What the Heck, Teck?" -- all of which lead up to this conclusion: "If the company manages to make payments as it has indicated it will, then what we will have here is one of the more substantially undervalued commodity players out there. If base metal prices remain here in the doldrums, though, then Teck could conceivably fold, which is why shares are languishing near $5."
Now, I'll be the first person to admit that I don't really understand mining companies. As a general rule, these enterprises tend to burn cash like crazy, yet receive valuations like they're printing money under Federal license. Even wildly popular firms like Newmont Mining (NYSE: NEM ) and Yamana Gold (NYSE: AUY ) seem to create minerals through the process of burning cash. In short, the whole industry makes my brain hurt.
But in this, Teck Cominco seems the exception that proves the rule. Fact is, Teck is one of the very few miners I've come across that makes money. At last report, Teck Cominco had generated $1.2 billion in free cash flow over the past 12 months. What's more, in years past, it has generally earned even more. Suffice it to say that even though I don't get the industry, I am really interested in digging into this one further.
Time to chime in
But will digging so quickly run into bedrock? Is Teck Cominco a dry well? Choose the metaphor of your choice, but make sure to click on over to CAPS and tell us what you think about this least techie of Teck stocks.
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