The market is turning. It was up earlier this year, and then it took a huge swing down. It turned back up, but what's going to happen next? It's going to turn down again. As always. That's not the skeptic in me speaking, that's the truth. The market is always fluctuating.
But that's why there are always values to be found.
The upside of downside
Following short-term price fluctuations in the market or a stock isn't the way to find long-term value. No matter what the overall market's situation, there are always good companies trading at a discount.
Take a look at these six companies:
| Company Name | Feb. 2006 Price | Recent Price | Discount |
|---|---|---|---|
|
Drew Industries (NYSE:DW) |
$35.20 |
$27.40 | 22% |
|
Federated Investors (NYSE:FII) |
$38.12 |
$34.29 | 10% |
|
IMAX (NASDAQ:IMAX) |
$7.67 |
$5.10 | 34% |
|
Pacific Sunwear (NASDAQ:PSUN) |
$24.85 |
$17.29 | 30% |
|
Ruth's Chris Steakhouse (NASDAQ:RUTH) |
$22.21 |
$18.89 | 15% |
|
Urban Outfitters (NASDAQ:URBN) |
$26.51 |
$18.91 | 29% |
I've had my eye on these companies for the past few months. Each of them has a strong business model and a history of returning value to shareholders. And now they are all much cheaper than before. Whether the discount is due to consumer fickleness, like with Pacific Sunwear, or to a snag with a potential buyout, which is what happened to IMAX, if these are companies you continue to have faith in, then you should take full advantage.
So what does this prove?
- Every stock goes on sale, so you must ...
- ... have a wish list of investments with rough buy-below prices for your appropriate margin of safety. With a wish list ready, you can pounce when ...
- ... the price is right -- and most of the time, the market will beat down on your stock at some point, giving you an optimal entry point.
Fool's final word
The market isturning -- soon enough it will turn back down. And then it will proceed to go back up. But when you're investing for the long term, a short-term price drop is the best thing you could ask for. That's the time to buy at full speed.
At least that's what Philip Durell, the Fool's very own value-digger, told me. As advisor for the Motley Fool Inside Value service, Philip uses short-term panics to snap up worthy long-term investments. Overall, Philip's Inside Value picks have been worthy thus far -- they're beating the market by more than four percentage points since the newsletter's inception in September 2004. To see his two newest bargain-priced stock recommendations and the more than 30 other buy reports for free, click here for a no-strings-attached 30-day trial.
You heard it here first -- the market is turning. Aren't you glad you checked the news today?
This article was originally published on June 24, 2006. It has been updated.
Fool sector head Shruti Basavaraj owns shares of IMAX. Federated Investors is a Inside Value recommendation. Pacific Sunwear is a Motley Fool Stock Advisor selection, while Drew is a Motley Fool Hidden Gems pick. IMAX is a Rule Breakers recommendation. The Fool has an ironcladdisclosure policy.
