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5-Star Stocks Begging to Be Bought

By Morgan Housel - Updated Apr 5, 2017 at 6:56PM

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These stocks are just too cheap to ignore.

"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, as they are 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 13 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:


Price Change


Price/Book Ratio

Ratio (TTM)

ConocoPhillips (NYSE:COP)





Capital Source (NYSE:CSE)





Dow Chemical (NYSE:DOW)





ArcelorMittal (NYSE:MT)





NYSE Euronext (NYSE:NYX)





Ternium (NYSE:TX)





Tata Motors (NYSE:TTM)





Data from Motley Fool CAPS as of Dec. 18. TTM= trailing 12 months.

Looking at earnings in the rearview mirror typically means very little, but the disparity between what these companies earned in the past year compared to what they trade for today is pretty overwhelming. None of these are formal recommendations -- just a good starting point for you to dig a little deeper. Intrigued? You can rerun an update of this screen yourself, if you like.

Roiled by oil
Can you believe it? It seems like only days ago that ballyhoo over $150 oil was everywhere and most credible analysts predicted $200 oil was right around the corner.

Fast forward a few months, and we're in the mid $30s and falling by the day -- great if you're looking for relief at the pump, terrible if you're an oil company like ConocoPhillips.

For patient investors, though, it can be a blessing in disguise. The plunge in crude prices is actually setting up what'll inevitably be a spectacular rebound. Why? Lower prices causes oil producers to reduce supply and shelve investment, which sets up an even bigger supply/demand imbalance once the economy picks up again.

CAPS member BSHumphreyII seems to agree, viewing Conoco as a bargain at these prices, recently writing:

4 times earnings?! This thing's priced for $10 oil, which just isn't going to happen. OPEC is going to cut production significantly, soon, and while global economic numbers are bad, they aren't quite bad enough to justify any further decline in the price of oil. Supply problems aren't going anywhere. We're far more likely to see oil in the $60-$80 range next year, maybe higher.

[ConocoPhillips] also has some significant gas exposure, and gas inventories are down. The new administration might not like any of the fossil fuels, but they'll have to pick at least one because "renewable energy" is a looong way off from being economically viable. Gas is the cleanest of the three, and will be the first to benefit once the Obama administration starts to think clearly about energy.

Let's also not forget that Warren Buffett himself purchased 24 million shares of Conoco in recent months ... not a bad vote of confidence, I might say.                                                                   

Attack of the steel mills
Just like oil's spectacular collapse, steel stocks have been cliff diving as investors brace for what could be a nasty global recession. The pullback might be justified in the short term, but rampant pessimism is providing an opportunity to buy a market-leader like ArcelorMittal in an industry that will always have demand at what looks like a bargain price. Doesn't get better than that, does it?

As CAPS All-star TheHuney pointed out last month:

The book value of this stock is $45 and it's selling at over a 50% discount to that! All the while, it's still producing positive cash flows; for FY '07, I calculated about $11.50 per share in cash flows from operations and maybe $8 in free cash flows (depends on how you calculate it; but needless to say, it's positive). Will that drop over the next year? Probably, but even if it drops a considerable amount this might not be such a horrible deal. At the current share price, it's almost like 3 straight years of huge losses are factored in. 

Care to see what over 120,000 other investors are saying about these and oodles of other stocks? Check out our Motley Fool CAPS investor intelligence database. Click here to give it a whirl. It won't cost you a dime.

For further Foolishness:

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Tata Motors is a Motley Fool Global Gains pick. Dow Chemical and CapitalSource are Income Investor selections. NYSE Euronext is a Rule Breakers pick. The Fool owns shares of CapitalSource. The Motley Fool is investors writing for investors.

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Stocks Mentioned

ConocoPhillips Stock Quote
$100.10 (-0.67%) $0.67
ArcelorMittal Stock Quote
$25.30 (2.64%) $0.65
DuPont de Nemours, Inc. Stock Quote
DuPont de Nemours, Inc.
NYSE Holdings LLC Stock Quote
NYSE Holdings LLC
Ternium S.A. Stock Quote
Ternium S.A.
$34.95 (0.20%) $0.07
Tata Motors Stock Quote
Tata Motors
$31.02 (2.17%) $0.66

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

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