I am always looking for a good deal, whether that means buying an extra box of Cocoa 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 |
|---|---|---|---|
|
American Dairy |
(29.6%) |
(39.8%) |
**** |
|
OYO Geospace |
(25.7%) |
43.2% |
***** |
|
Teck Cominco |
(19.5%) |
(12.0%) |
***** |
|
Lundin Mining |
(17.4%) |
(29.5%) |
***** |
|
Cameco |
(16.2%) |
(10.4%) |
***** |
|
Trimble Navigation |
(16.0%) |
24.1% |
***** |
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 American Dairy.
Curdled dairy
This isn't the first time that American Dairy -- which actually operates in China -- has appeared on this list. Earlier in the year, quarterly results below expectations caught investors by surprise and resulted in bit of a sell-off.
So what has the company done to deserve this curtain call? Well, last week, it announced that it was dismissing its auditor and pulling its 2007 outlook after receiving notification that it is under informal investigation by the SEC. This may not be as bad as it sounds, however, since the company claims that the investigation focuses on its outside auditors and not the company itself.
Don't tell that to mililaniguy. He is one of the American Dairy bears on CAPS, and he notes that there is a distinct "lack of regulations and rules for financial reporting in China." He claims to be a former shareholder and thinks the SEC probe is something to be concerned about.
There are plenty of CAPS players still backing the majority bull opinion on the company, though. One such player, godwinslaw, said:
The market has overreacted to recent news. This company produces a quality product for a huge market with rapidly increasing demand. The opportunity is enormous, profitability is increasing, and the product will never go out of style.
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 78,000-plus players who are part of the community. Even if you'd prefer to pass on American Dairy, you can check out a couple of the other stocks listed above, or any of the 5,300 stocks that are rated on CAPS.
More CAPS Foolishness:
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