Whoever came up with the mantra, "sell in May and go away" is probably one of those people who follows every fad diet and has an arsenal in the basement waiting for Judgment Day. Admittedly, summer doldrums are hurtful to traders, but don't think you should take the summer off, too.
The bird that isn't in the Hamptons for three months gets the worm
Now, I'm not about to suggest that the markets are rearing up for the running of the bulls, but I also don't really care. Take a look at what the markets have done since the beginning of May until now.
^DJI data by YCharts
It looks like my EKG after I watch an episode of The Walking Dead. So while the traders are selling their Ducatis to make the house payment this summer, you should be scouring the market for deals. And let me tell you, there are deals.
Let's take a look at Leucadia (NYSE: LUK), for instance. I recently wrote a piece about Leucadia's relationship with Berkshire Hathaway and how a housing rebound would be lucrative for both companies. But Leucadia has much more than that going for it.
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Leucadia is a well-diversified company with a portfolio that reminds me of a Warren Buffett-style, value-for-years-to-come setup. For one thing, Leucadia owns 28% of investment bank Jefferies (NYSE: JEF). Now, once you stop choking because I said it owns part of an investment bank, listen here: Jeffries is a phenomenal bank.
I don't want to stray too far from the Leucadia story, but Jefferies is priced similarly to its larger and more evil investment banking counterparts, and for little reason. Since recovering from 2008, the company experienced what its CEO called "the second most profitable quarter in the company's 48-year history." Jefferies also hired aggressively, poaching top talent from shops such as Pimco and Deutsche Bank. With revenues on the rise, Jefferies can be an incredible value driver for Leucadia.
Leucadia trades below book value (0.82 price to book), which is totally crazy sauce. Holdings range from medical device manufacturers to vineyards and auto sales. What else? Ian Cumming and Joseph Steinberg, the showrunners, own nearly 20% of the company personally. The stock has seen nearly a third of its value disappear over the last year, mainly due to general market conditions affecting its investments. But with a great long-term oriented portfolio, I believe Leucadia is significantly undervalued.
Call the police; I like a tech company
The value-investing world typically has little patience for technology. It's not that those new Google glasses aren't cool; it's just that, for valuation purposes, tech companies are an infinite time suck. But the value world does like to dabble in semiconductors. To me, it's a much less risky business, driven by the demand of companies that are risky.
Marvell Technology (Nasdaq: MRVL) is not the biggest fan of the year 2012. The company is trading near a 52-week low and has had a year-to-date return of -20.5%. Why would such a tremendous semiconductor manufacturer suffer in the golden age of technology? Because some bozos think smartphone sales are winding down. I don't really want to get into that argument, but let's say two things: (1) No, they aren't. (2) Tablets.
Marvell trades at just under eight times forward earnings. Eight times forward earnings for a company that sells its products to a sector that is projected to grow more than 20% in 2014. Many semiconductors have been hurt this year, but Marvell is leading the downhill race in stock price. Competitor Texas Instruments (Nasdaq: TXN) is expecting a sharp decrease in EPS for 2012, and it holds a forward P/E of 12.3. The company will see similar growth to Marvell in the following years, but you get my point. While hard-drive sales are admittedly slowing, Apple and Samsung are selling 10 gazillion products per nanosecond (no citation available on that figure, rough estimate). And yes, Marvell sells to both of those companies.
All things considered, Marvell is a victim of market stupidity, not poor management.
We've only just begun...
The summer still has plenty of time for stocks to take an unnecessary beating, so stay tuned for more sarcasm and more cheap stocks that you should be buying. If the thought of another paragraph of snarky investment advice is too much to bear, I feel for you. In that case, I think you should listen to some of our top analysts. In celebration of our nation's birthday, check out these American companies that are set to make a major global impact, and have already started. The report's free, so check it out.
