Were you feeling a bit shell-shocked on Monday? I was. But amidst the panic, stocks with huge potential were getting seriously slashed. And I knew it was a great time to buy.
My typical portfolio fare tends to trade pretty thin, so I didn't actually get filled on any of my low-ball limit orders. But I did make quite a few outperform calls over in Motley Fool CAPS. I thought these picks, and the reasoning behind them, might provide some ideas for like-minded bargain-hunters out there.
My five killer CAPS picks are as follows:
TransGlobe Energy (NASDAQ:TGA)
Appropriately enough, I first learned about TransGlobe through CAPS. While hunting for top energy stocks that get overlooked on Wall Street, I found TransGlobe, which impressed me with its massive Middle Eastern leasehold and a key partnership with Occidental Petroleum (NYSE:OXY). Shares were trading for about $5 at the time.
Two other points are worth mentioning. First, this company's production is 100% oil, a figure that you'll generally never find among larger producers. Barrels of actual oil command a premium over so-called barrels of oil equivalent, wherein lower-valued natural gas is converted to oil on an energy-equivalent basis. Second, management appears to think and behave like an owner. Insider holdings stand at around 7%, and the company initiated a normal course issuer bid (the Canadian version of a share-buyback program) when shares tanked in July.
Well, shares got pummeled further yesterday, and I stepped in on CAPS at just under $3 per share. Given the spate of international oil M&A, I view TransGlobe as a tasty takeover target if investors keep leaving it in the lurch. Value will be realized one way or another.
Sims Group (NYSE:SMS)
This is the Australian scrap-metal player that swallowed Metal Management. I've gushed in the past about Metal Management's point man, Dan Dienst, who is now group CEO for the combined entity. This guy came in as a turnaround specialist, fell in love with a seemingly unlovable business, and has run it masterfully ever since. He's a true steward of shareholder capital and has decades left to shape a global recycling dynasty.
Sanderson Farms (NASDAQ:SAFM)
This one had me at "big bird deboning."
Sanderson is a poultry producer that has shifted its focus toward the highest value-added segments of the market. As a result, the company regularly reports return on equity figures worth clucking about. The only company I know to have attained similarly meaty margins is Sadia (NYSE:SDA), but they have some currency kinks to work out. This can be a brutal commodity business, and Sanderson has the right model in place to ride out the cycles.
PotashCorp (NYSE:POT)
When it comes to potash, I've been pounding the table for a while now. On a macro level, I've attempted to outline the supply-and-demand factors supporting today's elevated fertilizer prices. Based on that analysis, I find PotashCorp a compelling opportunity at today's prices. There's simply no peak in sight.
I'm going to keep hammering away at the theme of responsible stewardship, because it's something you can't look up on Yahoo! Finance. The principals at PotashCorp are expanding capacity in a disciplined way and buying back undervalued shares with excess cash flows. This is another company run by shareholders, for shareholders.
Winthrop Realty Trust (NYSE:FUR)
Before you peg me as commodities-crazed, consider this small-cap real estate investment trust.
The fuzzy-sounding ticker stems from Winthrop's former days as First Union Real Estate. That was before value hound Michael Ashner stepped in to steer this ship toward opportunistic real estate investments of all stripes. Real property, loans, securities -- it's all fair game here.
Winthrop has been beaten down along with the rest of the REITs, but this company, having raised a war chest for future investments, looks like a terrific way to participate in picking through the post-bubble rubble.
It probably won't surprise you to hear that management holds a huge stake here, and the company has a share-buyback program in place.
Foolish final word
I'm totally addicted to CAPS. It's a detriment to my social life, but it also focuses my mind on certain companies that I think I may want to own. CAPS also introduces me to new ideas, like TransGlobe. If you haven't joined the community of more than 115,000 fellow Fools, I sincerely recommend getting started. The next time a fire sale comes along, you'll be that much better prepared to snag your favorite stocks.
On Oct. 7, 2008, Fool Co-Founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.
