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.
So 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 of investors just 30 days ago:
|
Stock |
30-day |
One-year |
Current CAPS rating |
|---|---|---|---|
|
Quicksilver Resources |
(45.7%) |
(87.5%) |
***** |
|
Coventry Health Care |
(43.4%) |
(81%) |
***** |
|
Republic Services |
(34.7%) |
(44.1%) |
***** |
|
Gerdau |
(34.3%) |
(65.3%) |
***** |
|
Norfolk Southern |
(31.6%) |
(43.5%) |
***** |
|
Genco Shipping & Trading |
(30.8%) |
(72.8%) |
***** |
|
Arcelor Mittal |
(29.6%) |
(71.2%) |
***** |
Data from Motley Fool CAPS.
As the table shows, these stocks are all still highly regarded by the CAPS community despite their underperformance over the past month and year. 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 Norfolk Southern.
Why so blue?
The declines of the group above were primarily driven by the slump in the overall market over the past month. In a market as pessimistic as today's you need to really have something special going on to fight the tide.
Norfolk Southern fell a good deal more than the market though, likely owing to the continued bad news out of the overall rail sector. Norfolk, along with competitors CSX
What the bulls say
Norfolk has drummed up a strong following on CAPS with over 900 members bullish on the stock versus just 23 who think it will underperform the rest of the market. CAPS All-Star buffetsdaughter recently became one of the Norfolk bulls and wrote: "This is probably more of a long-term pick, as it may still have further to fall, but I think at these prices it is seeming like more and more of a bargain."
It would be hard to expect a quick uptick in results out of the railroad operators given that the price of oil and health of the economy are both working against them. However, as we look out over the longer term it gets more interesting. While I hardly expect to see oil prices at the levels they were at last year, right now they look to be held down by an overreaction to last year's bubble and the state of the global economy. As oil prices rise, as I expect, transportation by rail becomes more cost effective versus alternatives. Oil prices aside, though, rail is generally a more efficient mode of transportation over longer distances and efforts to reduce oil consumption could point toward more rail usage in the future.
And here's where it gets really interesting -- do we expect that there will be new rail networks laid? If you answered "no" -- as I have -- then we have to assume that current rail operators like Norfolk are sitting on some pretty valuable assets.
So do you think the recent drop has created a good buying opportunity? Or will the economic slump overwhelm Norfolk? Let the community know what you think -- head over to CAPS and share your thoughts with the other 130,000 members currently part of the community. Even if you'd prefer to pass on Norfolk, you can check out a couple of the other stocks listed above or any of the more than 5,300 stocks that are rated on CAPS.
More CAPS Foolishness:
