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 just 30 days ago:
|
Stock |
30-Day Return |
1-Year Return |
Current CAPS Rating |
|---|---|---|---|
|
NYSE Euronext |
(12.1%) |
(71.5%) |
***** |
|
Precision Drilling Trust |
(31%) |
(62.3%) |
***** |
|
Montpelier Re |
(9.3%) |
(12.4%) |
**** |
|
Jacobs Engineering |
(10.2%) |
(47.6%) |
**** |
|
Hercules Offshore |
(11.9%) |
(82.1%) |
***** |
|
ABB |
(10.6%) |
(48.9%) |
***** |
|
SEI Investments |
(11.1%) |
(52.8%) |
***** |
Data from Motley Fool CAPS as of Jan. 27.
As the table shows, the CAPS community still likes these stocks despite their underperformance over the past month. While these are not formal recommendations, they could be a great place to kick off some further research. I'll even get you started with some thoughts on ABB.
Why so blue?
Sometimes it's obvious why a stock has taken a hit. Caterpillar
Sometimes, though, a company doesn't have to commit any grievous offense for its stock to lose ground. Such has been the case for ABB over the past month. The stock has slid more than 10%, without the help of any major negative news releases. Is this opportunity knocking? Let's see ...
What the bulls say
If you like the idea of the stability that utility stocks offer, but either have your fill of utilities or they bore you, ABB may be your answer. ABB isn't a power distributor itself, but sells gear such as big-boy circuit breakers and transformers to utilities and other industrial companies.
There's really a lot to like about the company -- it sells into a stable industry, it keeps a pretty conservative balance sheet, it produces a healthy amount of cash, and it returns some of that cash to shareholders through share buybacks and dividends. ABB's shares also appear to be trading at quite a bargain (though what isn't these days?). Of course, optimism does need to be tempered a bit by the allegations of anti-competitive practices and the $850 million that the company has set aside to deal with restructuring and those claims.
Almost across the board, CAPS members see ABB as a stock likely to outperform the rest of the market. One of the 1,495 ABB bulls, CAPS All-Star TSIF, gave the stock a thumbs-up recently:
It's power offering are a lot more than the ticker info above! High Voltage, Low voltage, rail [connections], underseas, robotics, In the long run all of the unique power plants from alternative energy will need connected to the grid and monitored. ABB is sitting on cash, great cash flow, and solid 5 year growth curve until the recession kicked in. Based in Swiitzerland it has a broad reach. Efficient, Green, Growth, dividend, strong margins. Founded in 1883 it's well entrenched.
So do you think the recent drop has created a good buying opportunity? Or will ABB continue to sink with the rest of the market? Let the community know what you think -- head over to CAPS and share your thoughts with the other 125,000 members. Even if you'd prefer to pass on ABB, you can check out a couple of the other stocks listed above or any of the nearly 5,400 stocks that are rated on CAPS.
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