I'm 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, offering 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, offering you premium prices for your holdings. At other times, he'll be inconsolably depressed about the future, and he'll offer to sell you his holdings 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 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 |
|---|---|---|---|
|
China
Fire & Security |
(29.4%) |
63.8% |
***** |
|
FCStone Group |
(26%) |
21.7% |
***** |
|
Silver Wheaton |
(11.2%) |
51.3% |
***** |
|
Landec |
(11.1%) |
(40.5%) |
***** |
|
Aetna |
(9.9%) |
(6.6%) |
**** |
|
Sotheby's |
(8.9%) |
(46.2%) |
***** |
|
Spirit AeroSystems Holdings |
(7.5%) |
(29%) |
***** |
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 Landec.
Why so blue?
Landec is a pioneer in the areas of food-products and agricultural-seed technology.
I know what you're thinking: "Come again?"
Without getting into the science of it, Landec produces food packaging materials and seed coatings using its own proprietary polymer. The results: better fresh produce with a longer shelf life, and seeds that produce overall better crop yields with longer crop-planting windows.
In the current market, though, investors just aren't interested in small, unproven companies. That description fits little ol' $200 million Landec like a glove, and investors have backed away in a big way since late 2007, sending the stock down 52% from its 52-week high.
The company didn't get much help from its recent announcement that it's putting off filing its third-quarter earnings report because its new accountant has raised some questions over some of the company's transaction accounting. Potentially balancing a little good with the bad, though, Landec said it had expected to announce earnings of $0.15, in line with Wall Street estimates.
What the bulls say
There are 973 players on CAPS that have overlooked Landec's small size and big drop and rated the stock an outperformer. A number of these bulls like that the stock is now pretty darn cheap, and that the company is selling innovative solutions that fill market needs. One such player, CAPS All-Star kristm, gave the stock a thumbs-up a month ago, saying:
[Landec is] innovative and profitable. Seems to be choosing steady development over fast growth-they're going to quietly build a solid business and not worry about what the market says or does. Products look very useful in a lot of ways, food service is just the tip of a considerably large iceberg.
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 95,000-plus players. Even if you'd prefer to pass on Landec, you can check out a couple of the other stocks listed above, or any of the 5,500 stocks rated on CAPS.
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