I'm always looking for a good deal, whether that means buying an extra box of Lucky Charms when it's on sale, or pouncing on undervalued stocks. The idea that anybody would sell a stock below its true worth may seem silly. But legendary value investor Ben Graham's famous allegory tells us how we can look out for these situations.
In The Intelligent Investor, Graham introduces readers to a wacky guy named Mr. Market. He pays you house calls on a daily basis, offering to sell you interests in businesses he owns, or buy interests in businesses you own. Sometimes, Mr. Market will show up at your door very excited, offering you premium prices for your holdings. Other times, he'll be totally 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 merited a five-star rating (the highest) from our community of investors just 30 days ago:
|
Stock |
30-Day Return |
One-Year Return |
Current CAPS Rating |
|---|---|---|---|
|
ENGlobal |
(19.3%) |
41.6% |
***** |
|
Quality Systems |
(16.6%) |
(14.1%) |
***** |
|
LoopNet |
(14.5%) |
43.5% |
***** |
|
A.S.V. |
(14.2%) |
(8.9%) |
***** |
|
Eagle Materials |
(13.8%) |
8.3% |
***** |
|
PeopleSupport |
(12.6%) |
(31.1%) |
***** |
|
Portfolio Recovery Associates |
(12.5%) |
27% |
***** |
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 aren't formal recommendations, they could be a great place to kick off further research. I'll get you started with some thoughts on LoopNet.
Real estate!
Yelling that in a crowded room these days is about as advisable as trying to carry bottle rockets onto a commercial airplane. Most people are breaking out their 50-foot poles before they get anywhere near stocks related to that industry.
For this reason, many investors may read a few lines about what LoopNet does and spit, "Real estate? No way! That industry is terrible!" And this, Fool, is where opportunity can arise.
Though LoopNet is involved in real estate, this dual pick from Hidden Gems and Rule Breakers works exclusively with commercial properties. LoopNet provides an online marketplace to connect buyers and sellers in this segment. According to the company's website, it currently has $440 billion worth of properties listed on its site.
Contrary to conventional wisdom, the residential and commercial real estate markets don't move in lockstep. Residential real estate's current problems seem limited only to that market. True, if residential problems do spread to the rest of the economy, as some expect, the commercial market will likely suffer as well. But for now, commercial real estate has been holding up. LoopNet's results certainly don't seem to suggest a slowdown -- first-quarter revenue was up 52%, followed by 46% growth in the second quarter.
The CAPS community has been decidedly bullish on LoopNet's prospects. Of the 1,400 players to rate the stock, 1,376 expect it to outperform the market. PLynchJr, a CAPS All-Star, gave the stock a thumbs-up at the end of last month. The growth catalysts he cited for the company included the "continued rapid growth of membership and converting members to premium" as well as the potential to add new services. Though he also points out that shares carry a "rich" valuation, and that an economic slowdown could hurt the stock, he also estimates that that stock is worth $31, provided it can maintain a 30% growth rate over the next five years.
Has the recent drop created a good buying opportunity? Or is LoopNet still too highly valued? Let the community know what you think -- head over to CAPS and share your thoughts with the other 65,000-plus players in the community. Even if you'd prefer to pass on LoopNet, you can check out a couple of the other stocks listed above, or any of the 5,000 stocks rated on CAPS.
More CAPS Foolishness:
