I am always looking for a good deal, whether that means buying an extra box of bran flakes 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 chap 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 (5 max) |
|---|---|---|---|
|
RC2 Corp. |
(24.0%) |
(67.9%) |
***** |
|
Fundtech |
(13.6%) |
(33.7%) |
***** |
|
Umpqua Holdings |
(9.5%) |
(10.0%) |
**** |
|
VASCO Data Security International |
(5.9%) |
(61.4%) |
***** |
|
Teva Pharmaceutical Industries |
(3.1%) |
(11.5%) |
***** |
|
Philippine Long Distance Telephone |
(3.0%) |
(30.5%) |
***** |
|
Southern Company |
(3.0%) |
(5.1%) |
**** |
Data from Motley Fool CAPS as of Jan. 6.
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 further research. I'll even get you started with some thoughts on RC2.
Why so blue?
The lead paint that made its way onto the Thomas & Friends toys from RC2 back in 2007 was anything but good for business. But while the recall may have been painful it looks like the reverberations may hurt even worse. Earlier this week, HiT Entertainment, the owner of the Thomas brand, announced that it is taking its ball and going home. I mean moving the license for part of the Thomas line to Mattel's Fisher-Price unit when the RC2 agreement expires at the end of this year.
HiT hasn't said specifically that this is because of the lead paint incident, but it's hard to imagine that it doesn't at least play into the equation. And though RC2 will hang onto the license for wooden Thomas trains for another couple of years, the company has been working with its own talking train -- Chuggington -- a move that suggests it's not too confident that it will get to re-up its Thomas license.
All of this also raises concerns about whether RC2 will be able to hold onto the Bob the Builder brand -- another HiT property -- and whether there are any similar rumblings in its relationship with Nickelodeon.
What the bulls say
On CAPS, more than 500 members have rated RC2's stock an outperformer versus just 22 that have given it the thumbs-down. Of course most of these ratings rolled in prior to Monday's announcement by HiT. Many, like CAPS All-Star jtallenmd, saw the potential back in May for the company to shake off the lead paint scandal and get back on track:
This company was hit hard by lead based paints from one of their Chinese suppliers. They have worked hard to reestablish their credibility. They have a fair number of wel known brands including, Thomas the Tank Engine, Dora the Explorer, Sponge Bob, John Deere among others. This one will recover. It may take some time but I am a patient man.
There have also been more than a few CAPS members who have stepped in with an outperform rating since the announcement. Among them is pima1971, who on Monday wrote:
Toymaker lost the rights of Thomas the Train to Mattel and a 33% drop. Estimated loss of .25 per share by analysts and the stock drops $3.52 . Another stock poised for a quick rebound to recover about half the drop. Looking for about a 15% recovery in a few days.... but you never can tell about the market. Get in, get out.
So do you think the recent drop has created a good buying opportunity? Or will RC2 continue to suffer? Let the community know what you think -- head over to CAPS and share your thoughts with the 125,000 members currently part of the community. Even if you'd prefer to pass on RC2, you can check out a couple of the other stocks listed above or any of the 5,400 stocks that are rated on CAPS.
More CAPS Foolishness:
On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.
