"I will tell you how to become rich. Close the doors.
Be fearful when others are greedy. Be greedy when others are fearful."
-- Warren Buffett
Can't argue with that, can you? I don't need to remind you of how much fear is in the market these days. The beauty of it all is how much opportunity it's creating for those patient and diligent enough to search for the babies thrown out with the bathwater.
Using our Motley Fool CAPS ranking system's nifty screening tool, I looked for companies with the following characteristics:
- Five-star rating, as they are the best of breed.
- Trailing dividend yield of at least 3%.
- Price-to-book no more than 1.
- Four-week price change of less than negative 15%. I'm looking for bargains, right?
Among others, that screen dug up these stocks shredded to such paltry levels in the past month that it's hard to keep ignoring 'em.
Take a look:
|
Company
|
4-Week Price Change
|
Dividend Yield
|
Price/Book Ratio
|
Price/Earnings
Ratio (TTM)
|
|
Allied Irish Banks (NYSE: AIB )
|
(34.1%)
|
NA*
|
0.18
|
1.0
|
|
Dow Chemical (NYSE: DOW )
|
(23.2%)
|
9.0%
|
0.90
|
6.8
|
|
El Paso (NYSE: EP )
|
(18.6%)
|
3.0%
|
0.88
|
5.2
|
|
Freeport-McMoRan Copper & Gold (NYSE: FCX )
|
(19.4%)
|
NA*
|
0.51
|
2.5
|
|
Jones Lang LaSalle (NYSE: JLL )
|
(25.5%)
|
4.7%
|
0.67
|
4.9
|
|
NYSE Euronext (NYSE: NYX )
|
(20.4%)
|
5.6%
|
0.63
|
7.2
|
|
Seagate Technology (Nasdaq: STX )
|
(34.7%)
|
11.1%
|
0.45
|
2.4
|
Data from Motley Fool CAPS, Yahoo! Finance, and Capital IQ, a division of Standard & Poor's, as of Dec. 3.
*Allied Irish and Freeport McMoRan have recently suspended their dividends.
TTM = trailing 12 months.
Looking at earnings in the rearview mirror typically means very little, but the disparity between what these companies trade for today and what they earned in the past year is pretty overwhelming. None of these are formal recommendations -- just a good starting point for you to dig a little deeper.
The biggest shocker here is Motley Fool Global Gains recommendation Allied Irish Banks, an incredibly well-run company caught in the middle of a global fire sale of anything bank-related. Like so many other financials, Allied Irish gave its dividend the boot last month, canceling the payouts investors had enjoyed even as shares crumbled over the past year.
Nonetheless, our CAPS community isn't giving up hope on this five-star beauty. TMFGebinr summed up the thesis a couple of weeks ago:
Of the Irish banks, this is the best capitalized, even though it will probably have to take on additional capital to raise its Tier 1 level to compete with other UK banks. It can do this through selling some of its assets … It is exposed somewhat to the Irish housing downturn, mostly through developers. It continues to increase depositors, which also increases capital. ...
Over the next few months, I don't know where the price will go, but over the longer period of a few years, it should go up quite handily, especially after having been beaten down so far. Just wish my own basis was this low.
Well said. Take a company that kept its lending manners to itself over the years and team it up with a "sell-now-ask-questions-later" market, and out pops a gem like Allied Irish. What value investors have to love is that Allied Irish has been susceptible to panic in the bank industry. That adds up to irrational selling, and our CAPS community's drooling over this one.
Moving onto yet another sector mired in the frenzy, Freeport McMoRan has shed more than 80% year to date as the mining industry continues to suffer from the spectacular commodities bust.
While the collapse has been a real gut check, a very rational thesis for commodity plays like Freeport is the assumption that the unprecedented amounts of money being thrown at the financial system will eventually lead to inflation, if not hyperinflation, thus causing investors to flock to hard assets such as gold, silver, and copper ... Freeport's bread and butter.
CAPS member jtm1022 seems to take a similar stance, noting last week:
I expect the inflationary scenario with a weak USD to be the near term result of the massive increases to money supply to stabalize global financial crisis as the more palatable option. [Freeport McMoRan] will become as before a commodity hedge and go back to former price levels.
The one caveat to this scenario is a deep global recession causing a drawn out commodity slump that will forestall Freeport's recovery. While such a case could test investors' patience, those willing to wait for the inevitable rebound of the global economy are likely to be rewarded handsomely.
What do you think about this spectacular sell-off in the financial and commodities universe? To see what more than 120,000 other investors are saying about it, I invite you to check out our CAPS investor community. Click here to give it a whirl. It won't cost you a dime.
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