You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?
Smart investors like Warren Buffett or Marty Whitman love it when their stocks are suddenly selling at bargain-basement prices. For them, these companies become no-brainer buys.
The investors in the Motley Fool CAPS community also like a bargain, apparently. Below, you'll find three companies whose shares are selling at least 50% below their 52-week highs, but which still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.
|
Stock |
CAPS Rating |
% Off 12-Month High |
|---|---|---|
|
Dean Foods |
**** |
57% |
|
Delta Petroleum |
**** |
60% |
|
GMX Resources |
**** |
65% |
Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your portfolio.
Take two, they're small
It's not a distinction you'd want to have, but for investors it represents a big opportunity. Dean Foods, one of the country's biggest dairy processors, is also the worst performing stock in the S&P 500 so far this year and short-sellers think there's more trouble in the future.
Higher costs and a heavy debt load have weighed on Dean as consumers continued choosing private label brands over name-brand items. Grocery chains like Kroger
The market is pricing Dean as if there's no tomorrow. At less than 10 times next year's earnings and below its book value, the dairy processor looks poised to milk future opportunities. It was one of the reasons I own the stock in my own portfolio. CAPS member socalguyCUI agrees its deeply discounted price offers a unique opportunity.
Dean Foods had a bad quarter earnings report and immediately dropped 28% to a fresh 52-week low. With a P/E of 8 and a strong market share, DF is very attractive at this price (under $8). The fundamentals are still there, and this stock should get back to the $11-$14 range in the next 4-6 months.
A reserve player
The depressed natural gas industry has caused a number of producers to sell off assets or go more deeply into oil, which continues to run higher. EOG Resources
Yet the natural gas developer's precarious financial condition has been a known quantity for investors, and while it previously warned that unless it could renegotiate its credit facilities, it probably wouldn't be able to repay the loans due in January, that danger seems to be fading. Delta recently announced it received a commitment letter for a new senior secured credit facility with Macquarie Bank.
It could be CAPS members never really thought that was a real possibility to begin with, which would explain why 96% of those rating Delta believe it will outperform the broad market averages.
Similarly, they've been equally behind independent oil and gas explorer GMX Resources. CAPS member Charlie1368 believes it has the portfolio to back up its efforts.
GMX Resources has amassed a body of assets that give it a solid competitive moat for at least the next few years. Trading at a discount to these assets which can produce long-term earnings potential, GMX Resources is a great value. Add in a decent balance sheet, solid cash flow, lots of insider buying, and bullish options sentiment, and you have a great buy.
Only you can decide, however, whether Delta or GMX is right for your portfolio. Add Delta to Fool.com's free portfolio tracker and let us know on the GMX Resources CAPS page whether the current cold snap will help them bounce back.
Have half a mind
Sign up today for the completely free CAPS service, and tell us whether these stocks are twice as good at half the price.
