Maybe we've bounced off the market bottom, or maybe this is just a bear rally. Either way, it seems obvious that a few truly excellent companies and their stocks remain beaten down to the point of "cruel and unusual punishment." And our CAPS community is an excellent place to start looking for outrageous values right now.
Here's what I'm looking for:
- Decent share prices and market caps -- no penny stocks, please!
- A steep fall from yearly highs.
- Not much of a bounce off the bottom.
- Four or five CAPS stars right now, six months ago, and a year ago. CAPS members love great businesses through thick and thin. Persistent love weeds out fads and the stocks that look dazzling only because they're cheap.
I got 14 results running this screen in our CAPS screening room on May 12. In February, a similar screen netted 246 results, so it was clearly easier to unearth a plethora of value plays back then. That only makes this smaller list more valuable, though -- the fire sales are few and far between right now, but we found a nice little stash regardless!
You can replicate my results for yourself, and tinker with the criteria as you please; just be aware that your mileage may vary, since the market is a moving target. Here's the cream of this very manageable crop:
|
Company Name |
Market Capitalization (billions) |
% Above 12 Month Low |
% Below 12 Month High |
|---|---|---|---|
|
Nasdaq OMX Group (NASDAQ:NDAQ) |
$3.90 |
29.0% |
50.3% |
|
Harris (NYSE:HRS) |
$3.82 |
5.1% |
57.1% |
|
Pepco Holdings (NYSE:POM) |
$2.74 |
24.1% |
54.4% |
|
Covance (NYSE:CVD) |
$2.53 |
26.9% |
59.7% |
|
Pharmaceutical Product Development (NASDAQ:PPDI) |
$2.47 |
16.7% |
54.1% |
|
Martek Biosciences (NASDAQ:MATK) |
$0.64 |
25.8% |
51.2% |
|
JAKKS Pacific (NASDAQ:JAKK) |
$0.36 |
27.8% |
52.1% |
Source: Motley Fool CAPS, as of May 12.
There's an investment in this group for nearly anyone. You have household names like the Nasdaq itself, and generous dividend payers like Pepco. Medical researchers such as Covance will benefit from pharmaceutical outsourcing trends in the long run, writes CAPS All-Star and fellow Fool Brian Orelli.
If you want the best possible discount, communications equipment maker Harris should be right up your alley. All-star CAPS member 00100 waxes laconically about the cushion that will keep Harris afloat:
Great cash flow and low debt. Low valuation. Strong balance sheet. Strong presence in military communications systems. High growth. Takeover candidate. Depressed price.
But the runt of the litter gets my attention this time. Toy wrangler JAKKS Pacific is a dependable cash machine with a relatively strong balance sheet and some of the fattest profit margins in the toys and games sector. And while the rest of the world hunkers down in defensive positions, JAKKS remains focused on profitable growth; it bought three smaller rivals in the fourth quarter.
That's exactly what I want to see from a small, laser-focused, and opportunistic company like JAKKS. The company should make it through the recession largely unscathed -- and it appears to be well-positioned to take off like a rocket, in both sales and stock price, when the good times start rolling again.
The next Foolish step
A simple combination of deep discounts and a lingering love affair with our CAPS community should indicate premium buy-in opportunities. Yes, some stocks fall into the abyss, never to return from what look like delicious value levels. But your fellow CAPS investors, and the machine intelligence that computes those star ratings, are not likely to stick with excellent ratings for the losers through thick and thin.
Great businesses tend to thrive after a recession, while the lesser lights stumble off to die. These particular stocks caught this Fool's roving eye as candidates for greatness at the end of the dark tunnel. Sign up for a 100% free CAPS account and see if you can do better.
