I am always looking for a good deal, whether that means buying an extra box of Golden Grahams 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 inconsolably 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 |
|---|---|---|---|
|
Yamana Gold |
(21.9%) |
(2.9%) |
***** |
|
Silver Standard Resources |
(20.0%) |
(17.2%) |
***** |
|
Coeur d'Alene
Mines |
(19.9%) |
(10.2%) |
**** |
|
Lundin Mining |
(19.0%) |
(38.1%) |
***** |
|
Dolby Laboratories |
(18.2%) |
6.5% |
***** |
|
Cameco |
(15.3%) |
(20.1%) |
***** |
|
Kinross Gold |
(13.3%) |
54.3% |
**** |
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 Yamana Gold.
Why so blue?
Yamana's drop came amid falling stock prices for a number of precious metal and natural resource companies -- a handful of which are also on the list above.
As the U.S. Federal Reserve has been pumping money into the economy at a breakneck pace, to try and mitigate fallout from the credit crunch, many investors have been looking for a hedge against potential future inflation. At the top of that list has been that classic inflation hedge, gold, which has traded as high as $1,000 per ounce not too long ago.
More recently, though, the combination of some gold speculators taking profits and investors getting a little less pessimistic has caused gold to fall off its highs. Not surprisingly, the sagging gold prices put a drag on the stock prices of the major gold miners like Yamana.
Also contributing to Yamana's drop were its fourth-quarter results. Though the company had already warned that production in the quarter would be light, results still came in well under what Wall Street was expecting.
What the bulls say
Many Wall Street analysts are still excited about Yamana's prospects, particularly if gold prices stay high. Closer to home, fellow Fool Toby Shute took a look at the company's fourth-quarter results and said that it doesn't change his bullishness on the stock, and certainly isn't a reason to start dumping shares.
On CAPS, the stock has gathered up 2,257 outperform ratings and the bulls don't seem to be changing their minds. One Yamana supporter, goofypicker, doesn't think that this is a bursting commodity bubble, in this recent pitch:
If you look at the fundamental reason behind the last 6 months rise in precious metals, you have to ask yourself....has anything changed? I don't think so. The Fed continues to pump liquidity into the market, the interest rate continues to decline, inflation continues to increase and the dollar continues to fall... Precious metals will experience quite a bit of volatility ... but I think ... that a year from now precious metals will be much higher.
So do you think the recent drop has created a good buying opportunity? Or is there more downside ahead? Let the community know what you think -- head over to CAPS and share your thoughts with the other 94,000-plus players. Even if you'd prefer to pass on Yamana, you can check out a couple of the other stocks listed above or any of the 5,500 stocks that are rated on CAPS.
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