"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." -- Warren Buffett
Out of the quadrillions of quotations quarried from that most loquacious of quotationists, this one holds a special place in the hearts of Foolish investors. Are you looking to "buy low" so as to later "sell high"? If so, your best chance of getting that initial, low entry price comes when panicked sellers are unloading their shares at whatever price is on offer.
In today's column, we search the ranks of Wall Street's motivated sellers and note which stocks they're most frantic to unload. Therein may lie the makings of a contrarian investor's shopping list. But don't just take my word for it. Before you decide to go in through Wall Street's out door, check your thinking against the collective intelligence of Motley Fool CAPS investors.
Today's contenders include:
|
Currently Fetching |
CAPS Rating (out of 5) |
|
|---|---|---|
|
Temple-Inland |
$29.97 |
**** |
|
American Dental Partners |
$9.99 |
** |
|
Altus
Pharmaceutical |
$5.22 |
* |
|
AMR Corporation |
$14.03 |
* |
|
Overstock.com |
$16.00 |
* |
The problem with pessimism
The problem with going against the grain on Wall Street is that when professional traders get pessimistic, their grim outlook can become a self-fulfilling prophecy -- at least in the short term. The more desperate institutions become to abandon a stock, the lower the price they'll accept to get rid of it. And as their "ask" prices drop, the "bid" prices of buyers will fall in tandem, creating the very price decline they feared in the first place.
Until the selling stops.
In through the out door
When it will stop is anybody's guess. But until it does, savvy investors have a chance to "get greedy," and snap up some bargains from these fearful sellers (if bargains they truly be).
As luck would have it, investors do see a bargain this week, but it's a bit of a tricky situation. Here are the bare bones of what's happening at erstwhile corrugated-packaging, particle-board, real estate, and financial services conglomerate Temple-Inland. First off, Temple-Inland has spun off its financial services and real estate businesses into separate, publicly traded entities named, respectively, Guaranty Financial Group
As if the confusion inherent in the three-way divestiture wasn't enough, investors also have to contend with an earnings warning from earlier this month (which seems to relate more to Guaranty Financial than to Temple-Inland), followed by a new warning contained in a Thursday SEC filing. The latter advises that Q4 earnings will be reduced by $0.62 in one-time charges related to a litigation settlement and the closure of a particle-board plant.
After all this news, I can see why investors might think this stock is gonna rocket (not). But before joining in the selling frenzy, let's take a look at what our CAPS players have to say about Temple-Inland, and whether there's reason for anything other than abject despair here.
The bull case for Temple-Inland
For the most part, CAPS players seem to be riding Carl Icahn's coattails on this one. The sum total of CAPS All-Star SapphireSeas' pitch, for example, is a Reuters citation describing the spin-off scenario and noting that Icahn has used his beginning-of-year 8% stake in Temple-Inland to push for the restructuring.
Andismoney opines:
Carl Icahn got what he wanted: break up this conglomerate to extract as much value as possible. We'll see how the spun off real estate and financial services businesses do as separate entities: it's not a great time to start out in either of those sectors, but that may be a plus: they should have nowhere to go but UP. Bonus: Special Dividend and free shares in each of the new businesses aint't too shabby!
Special dividend? Oh, yes. I should have mentioned that the restructuring plan included the payment of a $10.25-per-share dividend on Dec. 21. Don't factor that into your decision on whether to buy Temple-Inland today, however. You needed to be a shareholder of record on Dec. 12 to get a piece of that.
Time to chime in
Put it all together and you have... what? There are so many moving parts here, I'm at a loss what to make of it all. Fortunately, CAPS is a community of investors, where one person in the know can share his or her knowledge with many. If you're that "one," here's your chance to show off -- come on over to CAPS and clue us in on why Temple-Inland is worth owning (or not).
Motley Fool CAPS: It's fun, it's free, and it just might make you famous.
