I'm always looking for a good deal, whether that means buying an extra box of Cocoa Puffs on sale, or pouncing on undervalued stocks. And if the idea that anybody would sell a stock for less than its worth seems silly, well, you haven't met Mr. Market.
According to The Intelligent Investor, by legendary value investor Ben Graham, Mr. Market pays you house calls each day. He'll offer to sell you interests in businesses he owns, or buy from you interests in businesses you own. Sometimes Mr. Market shows up very excited, offering you premium prices for your holdings. At other times, he'll be totally depressed about the future, peddling his stocks for as low as pennies on the dollar.
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 merited a maximum five-star rating from CAPS players just 30 days ago:
|
Stock |
30-Day Return |
One-Year Return |
Current CAPS Rating |
|---|---|---|---|
|
ABX Holdings |
(33.5%) |
(57.4%) |
***** |
|
Aluminum Corp. of China |
(31.1%) |
57.1% |
***** |
|
China
Petroleum & Chemical |
(28.3%) |
28.7% |
**** |
|
McDermott International |
(27.9%) |
79.5% |
***** |
|
Arris Group |
(27.8%) |
(45.6%) |
***** |
|
Manitowoc |
(27.6%) |
25.1% |
***** |
|
Middleby |
(27.5%) |
(1.1%) |
**** |
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 further research. I'll even get you started with some thoughts on Aluminum Corp. of China (Chalco) and China Petroleum and Chemical.
China
chokes
It may still be a juggernaut, but China has shown recently that it's not invincible. Since October, Shanghai's SSE Composite Index is down some 25%, and the Hang Seng is down more than 30%. Not surprisingly, the drop in these markets has taken many U.S.-listed shares of Chinese companies along with it.
Despite the sell-off, some of CAPS' top players have remained bullish on many high-quality Chinese companies. CAPS All-Star Niksurfs found Chalco's reduced price a month ago too good to pass up, saying, "Fundamentally this is a wonderful stock now back to levels that pull money from my pockets yet again." He noted the company's relatively low P/E ratio and the tremendous opportunity in the rapidly growing China market, "even if growth in China is tempered from 11.5% to say ... a modest 9% or even 8.5%."
Meanwhile, fellow All-Star vladdfool picked up the scent on China Petroleum. He noted at the end of the year:
[China Petroleum is the] largest petrochemical producer in China, and processed 51% of China's total crude oil throughput this year. Invests heavily in new refining technology, so is one of the most efficient refiners in the world (competitive downstream market player), but also has significant upstream potential, including Puguang field etc... Regardless of domestic slowdown, this company will outperform.
I think the story of China as a growth engine has provided a lot of hype for mediocre companies. Meanwhile, most of the solid companies in the country have been bid up to such lofty prices that I nearly gave up on looking at China stocks at all. As the two Fools above highlight, though, many of these stocks have been coming back to earth lately, and the drops may provide good opportunities for investors to buy at reasonable prices.
Has the recent fall created a good buying opportunity, or does more downside lurk ahead? Let the community know what you think -- head over to CAPS and share your thoughts with the other 82,000-plus players. Even if you'd prefer to pass on Chalco and China Petroleum, you can check out a couple of the other stocks listed above, or any of the 5,300 stocks currently rated on CAPS.
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