I am always looking for a good deal, whether that means buying an extra box of Coco Puffs when they're 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 wacky 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 |
|---|---|---|---|
|
LoopNet |
(32.1%) |
(0.2%) |
***** |
|
Alvarion |
(26.9%) |
32% |
**** |
|
ICO |
(26.5%) |
65.4% |
***** |
|
inVentiv Health |
(24.9%) |
(5.6%) |
***** |
|
Diana Shipping |
(23%) |
106.1% |
**** |
|
American Science & Engineering |
(21.7%) |
(26.5%) |
***** |
|
NVIDIA |
(19.7%) |
22.9% |
***** |
As the table 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 get you started with some thoughts on Motley Fool Stock Advisor pick NVIDIA.
Dialing back gains
It's crazy how many of the stocks hitting the radar this week were smoking hot just a few months ago. Now that the sky is falling, the stocks that investors were tripping over themselves to get their hands on are now being treated like the shirtless guy in the 7-11.
While some investors are rushing to "lock in profits," though, others see the lower prices as an opportunity. A recent thumbs up on NVIDIA in CAPS came from lordhep, who commented, "[u]nless a miracle happens no one is going to topple the performance lead" that NVIDIA possesses. Greaterajax, who's also positive on NVIDIA, added that it's "a company that will pay off handsomely in the long term."
It seems like a pretty hard assessment to argue with. NVIDIA is a leader in the high-growth area of graphics processing chips. Though it's notoriously tough to hang onto a leadership position in the constantly changing world of technology, the company is no spring chicken by tech standards and hasn't just recently found success. To top it off, the stock trades at a relatively mild P/E ratio of 23 and is expected to grow earnings 20% annually over the next five years.
So has the recent drop created a good buying opportunity? Or is there more downside ahead for the stock? Let the community know what you think -- head over to CAPS and share your thoughts with the other 75,000-plus players currently part of the community. Even if you'd prefer to pass on NVIDIA, you can check out a couple of the other stocks listed above or any of the 5,200 stocks that are rated on CAPS.
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