Mr. Market's game is to pay you house calls on a daily basis to persuade you to buy or sell the stocks of businesses he owns or wants to own. Because of Mr. Market's bipolar affliction, he will sometimes show up at your door fantastically excited about the prospects for the future, will want a sky-high price for his stocks, and will similarly offer you premium prices for yours. On the other hand, he will occasionally become inconsolably depressed about what the future may hold and will offer to sell you his wares at prices as low as pennies on the dollar.
As an investor, your task is to figure out the value of the items Mr. Market is hawking, buy from him when he offers low prices, and sell to him when he gets too excited about certain items.
This week, I've picked out seven stocks that have been given a five-star rating by The Motley Fool's CAPS community but whose price has been cut over the last 30 days. Are these examples of Mr. Market getting too depressed, or are they not top-quality merchandise after all?
Here are the week's stars on sale, as identified by your fellow Fools on CAPS. 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 |
|---|---|---|
|
AZZ (NYSE:AZZ) |
(17.5%) |
86.9% |
|
AEP Industries (NASDAQ:AEPI) |
(16.9%) |
69.4% |
|
Somanetics (NASDAQ:SMTS) |
(13.9%) |
(23.5%) |
|
Gruma SA de CV (NYSE:GMK) |
(13.9%) |
(11.9%) |
|
Wireless Facilities (NASDAQ:WFII) |
(13.7%) |
(53.6%) |
|
QLogic (NASDAQ:QLGC) |
(12.7%) |
(1.3%) |
|
Superior Energy Services (NYSE:SPN) |
(12.4%) |
(10.0%) |
Of the seven stocks above, three of them -- Gruma SA, QLogic, and Superior Energy Services -- are still five-star selections in CAPS, despite the bout of underperformance. AZZ dipped down to four stars after a few recent underperform ratings, while both AEP Industries and Somanetics slid to three stars.
The greatest thing since sliced bread
"Boring could be good." That's what CAPS member PrincetonAl said of tortilla juggernaut Gruma SA. I agree. If you ask me, tech companies looking to be the next Microsoft are a dime a dozen, as are biopharmas hoping to be behind the next blockbuster drug. A couple of these companies will go on to do great things, while most will float along in mediocrity before either falling into obscurity or getting quietly, cheaply bought out.
But a nice, boring company like Gruma -- now that'll get me interested. Gruma is the worldwide leader in corn and flour tortillas, just about one notch up on the excitement scale from rock pits. And while the actual business may not be terribly exciting, the market is not nearly as dull. Marketing execs across the U.S. are busy at this very moment trying to figure out how they can grab a portion of the growing wallet of the dynamic Hispanic consumer. For Gruma, which sells a staple of Mexican cuisine, the Hispanic population is its core demographic and consumer base. And that's not to mention the rapidly growing popularity of Mexican food across the U.S., as evidenced by popular chains such as Chipotle and Qdoba.
As Foolish CAPS player richsimpson points out, the company does carry a substantial debt load, but it has been churning out free cash flow. Of course, Gruma is not without its challenges, and the volatility of corn prices (which are currently at a 10-year high) could have a major effect on the company, since the ingredient makes up a significant portion of Gruma's cost of goods sold. Additionally, the market for Mexican food is no longer a secret, and because of the rapid growth of the market in the U.S. -- as well as Asia, Europe, and elsewhere -- Gruma could see increasing competition.
At the price at which Gruma is currently trading, I think investors have some good upside if the company continues to lead the worldwide tortilla market, and limited downside if competition hampers its growth. Sixty-one other CAPS members agree with me in thinking Gruma is going to outpace the S&P 500, but what's your take? Log onto The Motley Fool's investing community, CAPS, and let the other 20,000 players know. Heck, even if you couldn't give a hoot about Gruma or the tortilla industry, there are well over 3,000 other stocks to check out and share your thoughts about in CAPS.
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Not on CAPS yet? Fool contributor Matt Koppenheffer says, "I pity the fool that ain't on CAPS." He does not own shares of any of the companies mentioned. Microsoft is an Inside Value choice. The Fool's disclosure policy is tougher than B.A. Baracus himself.
