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 it's worth may seem silly. But legendary value investor Ben Graham (no relation to the cereal) 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, 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 received a top five-star rating from our community of investors just 30 days ago:
|
Stock |
30-Day Return |
1-Year Return |
Current CAPS Rating |
|---|---|---|---|
|
Turkcell |
(7.8%) |
47.5% |
***** |
|
Nam Tai Electronics |
(4.8%) |
61.1% |
***** |
|
Mueller Water Products |
(3.4%) |
142% |
***** |
Data from Motley Fool CAPS as of March 9.
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, let's take a closer look at whether opportunity could be staring us in the face.
Turkcell
Turkcell has faced a rocky road lately. Last month, the company announced that its fourth-quarter profit would fall 50%, thanks to asset writedowns and legal reserves.
The company has become a serious punching bag in recent months, as blows from the global economic downturn joined unfavorable rulings by Turkey's competition and tax boards. The Turkish telecom regulator also drastically cut certain rates, which took yet another bite out of Turkcell's results.
However, I still think this is a company to keep on your investment radar. Telecoms tend to be stable and reliable, and they can support great dividend payouts -- like Turkcell's current 5.2% yield. But unlike giants such as Verizon
Nam Tai Electronics
It seems likely that Nam Tai is still reeling from its fourth-quarter earnings miss last month. Though gross margins were higher this year, and the company wasn't hit by goodwill impairments, the year-over-year results remain pretty bleak.
I'm not going to pull any punches here: Nam Tai's industry sucks. As you can see from the razor-thin 10.8% gross margin, competition is brutal. And as with many other electronics manufacturers, Nam Tai also has very significant customer concentration. In 2008, a group of four customers -- including a Sony
However, Nam Tai could be worth taking a chance on anyway. Its stock is trading at laughably low multiples, and it sports a balance sheet with $195 million in cash and virtually no debt.
Mueller Water
The 3.4% loss on Mueller Water's stock over the past month may not seem like much of a sale. When you consider that the S&P 500 has gained 6.5% over the past month, though, you can see just how far Mueller has fallen behind.
Why has the stock suffered such a poor showing? Perhaps its fiscal first-quarter earnings report -- which came out in early February -- could still be weighing down the company. Though the $0.07-per-share loss matched analysts' estimates, investors may have been hoping for a better showing.
The market's recent pessimism has done little to dampen enthusiasm for Mueller on CAPS. Currently, nearly 1,400 CAPS members have rated the company an outperformer, and the stock carries a perfect five-star rating. Shortly after the earnings report, CAPS member augustspillers gave Mueller a thumbs-up, echoing what seems to be the Mueller mantra on CAPS:
Sooner or later we will have to replace our crumbling sewer system and Mueller is one of few public companies producing pipe for this purpose.
I've given all three of these stocks a thumbs up in my CAPS portfolio. But here's the important question: What do you think? Head over to CAPS and share your thoughts with the other 150,000 members currently part of the community.
Think you know all the investing greats? Matthew Argersinger thinks he's found the best investor that you've never heard of.
