I am always looking for a good deal, whether that means buying three boxes of Cinnamon Toast Crunch when it goes 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 crazy 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 totally 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 |
|---|---|---|---|
|
TransGlobe Energy |
(12.3%) |
(37.4%) |
***** |
|
Radware |
(9.3%) |
(18.5%) |
***** |
|
NovaMed |
(9.2%) |
(18.2%) |
***** |
|
Lamson & Sessions |
(9.1%) |
(9.6%) |
***** |
|
Hurco Companies |
(9.4%) |
43.8% |
***** |
|
Apollo Group |
(8.5%) |
(18.8%) |
**** |
|
Compass Diversified Trust |
(8.1%) |
N/A |
***** |
As the chart 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 kick you off with some thoughts on Apollo Group.
Apollo's history book
After a pretty rough 2006, I'm sure Apollo Group is wondering just how quickly it can transfer its struggles from the current-events ledger into the history tomes. Granted, earnings misses and stock-option scandals don't look all that great in the history books, either.
After a painful 25% drop in three days back in October thanks to a big earnings miss, the stock had charged back 29% by the beginning of March. Since then, the stock has been relatively directionless, with little for investors to react to; the result has been a downward price drift of 8%.
The bottom line, though, is that there doesn't appear to have been any change in the fundamentals over the past month. So all the good things that the CAPS community has been saying about it still apply, only now to a cheaper stock:
- 4puttFool: "Apollo Group has adopted a broader, more intense branding effort -- from purchasing naming rights to the new Arizona Cardinals stadium to TV commercials during prime time. The online side of the business is facing increased competition as other schools realize the potential online presents. However, Apollo appears to have the lead and is constantly improving both its technology and curriculum."
- PopsDaniecki: "[Apollo Group provides] education and education on the internet -- that means growth to me. The adult emphasis is even better! Its low price compared to its history and intrinsic value is even better! I like this looking forward for a long time -- or about 125%, whichever comes first."
So is Apollo looking like a bargain now? Let the community know what you think -- head over to CAPS and share your thoughts with the other 26,000 players currently part of the community. Even if you'd prefer to pass on Apollo, you can check out a couple of the other stocks listed above -- or any of the 4,300 stocks that are rated on CAPS.
For more CAPS coverage:
Make seven picks on Motley Fool CAPS by April 24 and we'll send you a free copy of The Motley Fool Five Star Report. Inside, you'll discover how to use CAPS as a research tool, and you will receive a recommended five-star CAPS pick poised to beat the market for the next decade or more -- one that you can easily translate into profits for your real-world portfolio. But please hurry; this special report will be mailed out on Tuesday, April 24, and it's only being sent to CAPS members who have their seven picks in. Click here to get started now!
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out Matt's CAPS portfolio here, or tune in to his CAPS blog here. The Fool's disclosure policy knows exactly what Willis was talking about.
