I am always looking for a good deal, whether that means buying an extra box of cereal when it's on sale or pouncing on undervalued stocks. The idea that anybody would sell a stock for less than it's worth may seem silly, but legendary value investor Ben Graham 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 following companies has been given one of the two highest ratings from CAPS members.
Current CAPS Rating (out of 5)
AFP Provida (NYS: PVD)
China Digital TV (NYS: STV)
Banco Santander (NYS: STD)
Boston Beer (NYS: SAM)
Corning (NYS: GLW)
Data from Motley Fool CAPS as of Sept. 15.
With gloom thick in the air, it may surprise some that the market has actually managed a pretty significant gain over the past four weeks. Yet these stocks have found themselves unable to even tread water during this stretch. But as the table shows, these stocks are all still very well regarded by the CAPS community despite their underperformance over the past month. These aren't formal recommendations, but let's take a closer look at whether opportunity could be staring us in the face.
Why so blue?
Oh, the woe that is the European Union. Stinks to be them, but Chile-based AFP Provida is a world away from that mess, right? Alas, it's not. As a huge pension-fund manager, AFP Provida is highly dependent on the overall health of the Chilean economy. And as a big exporter -- particularly of copper -- the Chilean economy is very dependent on the health of the global economy. As a result, the tribulations in Europe have been raining on AFP Provida's party lately.
If it might be a surprise to some how much the EU's problems would affect AFP Provida's stock price, it should surprise no one that the mess would absolutely hammer Banco Santander's stock. The giant Spanish bank has a hefty amount of exposure to Latin America, but with concerns about the EU ballooning, it's impossible for investors to overlook the fact that most of the bank's assets are still in Europe. Of course, Santander is far from alone in its slide, as Mr. Market has beaned fellow Euro-banks Barclays (NYS: BCS) and HSBC (NYS: HBC) -- among others -- over the past few months.
Is anybody truly safe from the European contagion? To some extent we could probably say "no," but it'd be tough to say that that's what's been causing the drag on China Digital TV's stock. It'd also be tough to say that it was the company's most recent earnings report that caused the dip. As my fellow Fool Harsh Chauhan detailed, China Digital delivered a sweet 29% year-over-year jump in revenue, and it also hurdled analysts' earnings-per-share estimates. So why the selling? Color me confused. The stock absorbed a 10% hit on Friday on heavy volume and no apparent news.
"Creamed Corning" was the headline that my fellow Fool Rich Smith slapped on his coverage of Corning's recent third-quarter update. In short, the company said that demand for the company's glass LCD screens for TVs and laptops is slackening, which hurts the top line, while capacity utilization rates are low, which isn't great for the bottom line. Add a dash of salt, and you have a surefire recipe for investor disappointment.
If you want to wash down that cruddy Corning concoction, you can try a cold Sam Adams, but try not to choke on the fact that the stock of its brewer, Boston Beer, has lagged the rest of the market as well. Why have investors been giving this stock the bitter-beer face? A bearish mid-August note from The Wall Street Journal -- which highlighted increased competition for the brewer as well as the stock's lofty valuation -- probably didn't help. However, other than that, there hasn't been concrete news in the past month that should have sent investors running.
Picking a winner
Though the CAPS community has a high opinion on all of these stocks, that doesn't mean I have to agree. My fellow Fools at Motley Fool Rule Breakers have recommended China Digital TV, but high-growth up-and-comers just ain't my bag. Not to mention that I still haven't figured out how to navigate the China-stock minefield. Because Corning's stock trades at such a low multiple, I want to like it, but I haven't yet been sold on the company's competitive advantage. And though I like the idea of AFP Provida -- and think the valuation looks reasonable -- that's a company (and country) that I don't know enough about to make heads or tails of it.
That leaves us with Boston Beer and Banco Santander. These are two drastically situations, and I have two very different views. Boston Beer is the kind of company that I'd rather own over the long term. The WSJ's view aside, I think company has carved out a nice position for itself in the beer market and will continue to benefit from the growth of craft-beer sales. However, the valuation, though falling, is still a little rich for my blood.
On the other hand, I'm all about the valuation at Santander, which currently trades at less than half of its book value. With pessimism settled over the EU like an army of angry Dementors, I think there's a lot of room for investors to be wrong in terms of how bad the EU fallout gets. Undoubtedly it could still get a whole lot worse, but I think it could be worthwhile to take a flier on a battered stock like Santander that does have that non-EU exposure.
I've gone ahead and given Banco Santander a thumbs-up in my CAPS portfolio. But here's the important question: What do you think? Head over to CAPS and share your thoughts with the other 180,000-plus members currently part of the community.
At the time thisarticle was published The Motley Fool owns shares of Boston Beer.Motley Fool newsletter serviceshave recommended buying shares of AFP Provida, Boston Beer, Corning, and China Digital TV Holding. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors.Fool contributorMatt Koppenhefferowns shares of Barclays but has no financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter, where he goes by@KoppTheFool, or onFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.
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