I am 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 its 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 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.
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
|
|---|---|---|---|
|
WSP Holdings |
(26.2%) |
(36.8%) |
***** |
|
ClickSoftware Technologies |
(15.7%) |
204.3% |
***** |
|
OYO Geospace |
(14.7%) |
(56.8%) |
***** |
|
Alvarion |
(14.4%) |
(37.3%) |
***** |
|
ENGlobal |
(10.3%) |
(73.4%) |
***** |
|
American Oriental Bioengineering |
(9.4%) |
(35.3%) |
***** |
|
Thompson Creek Metals |
(6.4%) |
(6.9%) |
**** |
Data from Motley Fool CAPS. Return calculated from Aug. 25, 2008, or July 24, 2009, through Aug. 25, 2009.
As the table shows, all of these stocks are 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 Motley Fool Global Gains favorite American Oriental Bioengineering.
Why so blue?
One might guess that the weakness in American Oriental Bioengineering's stock was caused by the company's one-penny earnings miss when it reported second-quarter results earlier this month. That guess would be wrong.
As my fellow Fool Brian Orelli pointed out, the company has been dealing with investor reaction to the $70 million it paid for a building at the beginning of the year. The most recent act in this saga was an accusation that there was an undisclosed relationship between the company and the seller of the building. No wonder the earnings miss had a muted impact.
But the suspected impropriety appears to have been cleared up, so we're safe to take a look at the company's operating results. While investors are used to seeing stellar growth from this company, it still seems hard to be too disappointed with the 21% top-line growth that it reported. The bottom line wasn't quite the same story, though, with net income falling slightly as a shift in the business mix put a crunch on American Oriental's margins.
What the bulls say
Despite the drama over the building and the worse-than-expected quarterly results, AOB's stock remains among CAPS members' favorites. The stock has nearly 3,000 outperform ratings against just 77 underperforms.
Among the bulls is Gtrinvestor, who is ranked in the top 1% of all CAPS members. This CAPS All-Star gave American Oriental's stock a thumbs-up earlier this month, betting that there's no substance to the building scandal:
Stock has been slammed recently due to some short-seller talking about potential unreported insider transactions regarding the co's acquisition of a building. I too was worried about this write-up, until I saw today that they changed auditors to [Ernst & Young] (one of the "Big 4" accounting firms). I will tell you, from being a former Big 4 accountant, that people will be fired from E&Y if they did not perform enough due diligence to be comfortable with taking on this engagement. Therefore, I think this is one of those "fearful / greedy" moments.
But here's the important question: Do you think the recent drop has created a good buying opportunity? Or are there some real skeletons in American Oriental's closet? Head over to CAPS and share your thoughts with the other 135,000-plus members in the community. Even if you'd prefer to pass on AOB, you can check out a couple of the other stocks listed above or any of the 5,300 stocks that are rated on CAPS.
More CAPS Foolishness:
