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 |
March 2006 Price |
Current Price |
Discount |
|---|---|---|---|
|
Openwave Systems (NASDAQ:OPWV) |
$21.10 |
$8.85 |
58.1% |
|
Apollo Group (NASDAQ:APOL) |
$52.00 |
$35.36 |
32.0% |
|
Whole Foods Market (NASDAQ:WFMI) |
$63.66 |
$49.40 |
22.4% |
|
Home Depot (NYSE:HD) |
$42.54 |
$38.28 |
10.0% |
|
Walgreen (NYSE:WAG) |
$45.09 |
$42.00 |
6.9% |
|
Best Buy (NYSE:BBY) |
$56.73 |
$55.00 |
3.0% |
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 has been due to concerns of a flagging trend and overreaction to a recent earnings report, like with Whole Foods, or to wondering whether Home Depot can outlast the slump in the housing market, 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. He used this strategy to recommend Home Depot to subscribers when analysts were predicting slower growth. In the past, he's recommended winners such as Omnicare (NYSE:OCR) and Mastercard, both of which went on to double in value. Overall, Philip's Inside Value picks have been worthy thus far -- they're beating the market by more than six 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 never know what the market's going to do, so be prepared before it turns. Just start your free access pass today.
This article was originally published on June 24, 2006. It has been updated.
Fool sector head Shruti Basavaraj does not own shares of any company mentioned above. Home Depot is an Inside Value pick. Whole Foods and Best Buy are Motley Fool Stock Advisor recommendations. Openwave is a Motley Fool Rule Breakers selection. The Fool has an ironcladdisclosure policy.
