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5-Star Stocks Begging to Be Bought

By Morgan Housel - Updated Apr 5, 2017 at 8:02PM

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These stocks are just too cheap to pass up.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." 
-- Warren Buffett

Can't argue with that, can you? I don't need to remind you of how much fear is in the market these days. But that fear is also creating abundant opportunities for investors patient and diligent enough to search for the babies thrown out with the bathwater.

Using our Motley Fool CAPS ranking system's nifty screening tool, I looked for companies with the following characteristics:

  • Five-star ratings, distinguishing them as the best of breed.
  • Trailing dividend yields of at least 3%.
  • Price-to-book ratios no greater than 1.
  • Greater-than-10% drops in share price over the last four weeks. I'm looking for bargains, right?

Among others, that screen dug up these stocks, which have been shredded to such paltry levels that it's hard to keep ignoring 'em.

Take a look:


4-Week Price Change

Dividend Yield

Price/Book Ratio

Price/Earnings Ratio (TTM)

Advantage Energy Income Fund (NYSE:AAV)





Himax Technologies (NASDAQ:HIMX)





Manulife Financial (NYSE:MFC)





NamTai Electronics (NYSE:NTE)





Precision Drilling Trust Units (NYSE:PDS)





Penn West Energy Trust (NYSE:PWE)





Teck Cominco (NYSE:TCK)





Data from Motley Fool CAPS as of Dec. 11. TTM= trailing 12 months.

Looking at earnings in the rearview mirror typically means very little, but the disparity between these companies' current and year-ago prices is pretty overwhelming. None of these are formal recommendations -- just a good starting point for you to dig a little deeper.

Insurance? In this market?
Shares of Manulife have been trampled since AIG's collapse in September. Worse yet, it just completed a $2.275 billion equity offering, diluting exisiting investors. Still, our CAPS community looks upon the company fondly. 

As CAPS member bajaisaak noted last month: "Panic sellers that need to sell everything at any price to meet redemptions or margin calls. Manulife will be around in 5 years at much higher prices and may even exploit the weakness in other competitors (ie AIG) to boost market share."

The last part -- picking up business from AIG -- seems feasible, but I also think there are a few unhelpful developments brewing in the insurance industry. Foolish colleague Dan Caplinger pointed out earlier this month that a slew of insurance companies, including Manulife, are struggling with long-term care products that had fueled growth in recent years. As Warren Buffett warned earlier this year, "It's a certainty that insurance-industry profit margins … will fall significantly in 2008. Prices are down, and exposures inexorably rise."

Still, with shares down more than 60% this year, a tremendous amount of that pain may already be priced in. Analysts expect Manulife to earn $2.46 per share in 2009. If that actually comes to pass, the company seems like a steal at these prices.

Yet another battered driller
Sure, Precision Drilling Trust has been slaughtered in recent months, as the price of anything commodity-related fell off a cliff. But some investors think the declines' ferocity is much ado about nothing. CAPS All-star MysterInsidious is one of them, noting in November:

Oil, gas, and most commodities in general have been sold off hard due to recession fears, hedge fund redemptions, margin calls, and unwinding of the yen carry trade … I believe the unwinding of the carry trade has helped to push prices of commodities and anything related to commodities too far. Once these negative pressures are exhausted, I believe the US dollar will go back to declining in value, especially when China, Japan, the Middle East, and other countries reduce or stop purchasing treasury bonds to focus more on their own economic problems. When this happens, I expect all commodities to significantly increase in value.

You saw this firsthand yesterday, when the dollar fell and oil surged more than 10%. I'm pretty confident we'll see a fair amount of deflation before any sort of sustainable inflation kicks in, but MysterInsidious's points are compelling: The long-term prospects of the dollar are pretty abysmal.

Fellow Fool Toby Shute, who covers everything energy, seems to approve of Precision's prospects as well. He notes: "[Precision] has earned its market premium through performance, asset quality, and pricing and capital discipline. I don't think it would be a mistake to pay a little more for such attributes, especially at these prices. "

Any of these ideas look attractive to you? Think these investors are missing part of the story? You can throw in your two cents -- alongside those of 120,000-plus other investors -- over at Motley Fool CAPS. Click here to see what it's all about.

For further Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Precision Drilling and Nam Tai Electronics are Motley Fool Global Gains recommendations. The Motley Fool is investors writing for investors.

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Stocks Mentioned

Precision Drilling Corporation Stock Quote
Precision Drilling Corporation
$67.39 (1.42%) $0.94
Manulife Financial Corporation Stock Quote
Manulife Financial Corporation
$19.12 (2.25%) $0.42
Teck Resources Limited Stock Quote
Teck Resources Limited
$34.35 (3.59%) $1.19
Nam Tai Property Inc. Stock Quote
Nam Tai Property Inc.
$4.21 (0.00%) $0.00
Himax Technologies, Inc. Stock Quote
Himax Technologies, Inc.
$7.53 (4.29%) $0.31

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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