I am always looking for a good deal, whether that means buying an extra box of Frosted Flakes when they're on sale, or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than it's 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, offering to sell you what he has 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 maximum five-star rating by our community of investors just 30 days ago:
|
Stock |
30-day return |
One-year return |
Current CAPS rating |
|---|---|---|---|
|
Interactive Intelligence |
(43.4%) |
(65.7%) |
**** |
|
Infosys Technologies |
(21.8%) |
(27.8%) |
**** |
|
Heartland Payment Systems |
(19.9%) |
(27.8%) |
***** |
|
Silicon Image |
(19.2%) |
(27.6%) |
***** |
|
Millicom International |
(18.8%) |
(1%) |
***** |
|
Trimble Navigation |
(18.6%) |
(10.5%) |
***** |
|
Freeport-McMoRan |
(14.5%) |
14.7% |
***** |
Data from Motley Fool CAPS as of July 15.
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 Infosys.
Why so blue?
Putting on my best Jeff Foxworthy voice, you know it's a tough market when ... you report revenue and earnings growth of 25% and 17%, respectively, and beat analyst estimates, and your stock still falls 13%.
Does that sound strange? Well, it was exactly the case for Indian IT services specialist Infosys. And before you go jumping to conclusions about lowered guidance, consider that management is expecting respective revenue and profit growth of 20% and 15% for the full year. Let's just say that's a heck of a lot better than a kick in the teeth.
But speaking of kicks in the teeth, honesty from Infosys' management ultimately led to the stock losing a few of its incisors. By noting that the slowdown in the U.S.A. -- where Infosys does most of its business -- could hurt the company, management invited investors to conjure up a worst-case scenario. Apparently, they did just that.
What the bulls say
For the members of the CAPS community, the pros for Infosys seem pretty blatant. The company is based in India, one of the top growth economies in the world, and a locale that offers highly qualified workers at lower relative cost. Infosys stands at the head of the India outsourcing class; as a result, it's highly profitable, and it's been growing like a weed for years. And with a trailing P/E multiple of under 18, it's not nearly as expensive as it once was.
CAPS All-Star anuragupta kept it short and sweet in a bullish pitch back in late 2006, noting: "[Infosys] is a very well managed and a fast growing company in India. Outsourcing to India is growing at a rapid pace and this company is doing very well to capture that business."
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 CAPS' other 110,000-plus players. Even if you'd prefer to pass on Infosys, you can check out a couple of the other stocks listed above, or any of the 5,500 stocks CAPS rates.
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