You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?
Smart investors like Warren Buffett or Marty Whitman love it when their stocks are suddenly selling at bargain-basement prices. For them, these companies become no-brainer buys.
The investors in the Motley Fool CAPS community also like a bargain, apparently. Here you'll find three companies whose shares are selling at least 50% below their 52-week highs but that still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.
CAPS Rating(out of 5)
% Off 12-Month High
Hecla Mining (NYS: HL)
Huntsman (NYS: HUN)
Patriot Coal (NYS: PCX)
Source: Motley Fool CAPS.
Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your portfolio.
Standard of excellence
Call it the gold (or silver) standard for stocks: precious-metal mining companies are increasingly pegging their dividend payments to the price of either gold or silver. Hecla Mining, as one of the top silver miners in the world, recently became the first one to tie its dividend payment to the price of silver. At $40 per ounce, around where the gray metal trades today, Hecla's quarterly dividend would be $0.03 per share, or $0.12 annually.
Hecla's adopted this policy because it's a low-cost operator and wants shareholders to benefit from the high margins it enjoys as a result. But it's by no means the only miner making similar moves, with gold miners Eldorado Gold (NYS: EGO) and Newmont Mining (NYS: NEM) linking their dividends to gold prices.
It's an interesting way to benefit from the rising price of precious metals, but if (when) the direction turns, it will seem less intriguing to investors then. Don't expect income investors to be piling in any time soon.
The dividends may ultimately fall, but CAPS member MajorBob04 says Hecla's status as a premier low-cost miner will continue benefiting investors regardless: "Cost of mining silver is well below current silver prices, so even if silver goes down again, the profits will continue for many years to come."
Add Hecla Mining to your Watchlist and see whether pegging its dividend to the price of bullion ends up paying dividends down the road.
Paint it black
After chemicals specialist Huntsman reported flat earnings that disappointed the market and sent its stock careening 30% lower in a single day, its CEO plunked down $1.1 million and bought 100,000 shares. Its chairman doubled the outlay and added 200,000 shares to his portfolio. They might have made a fairly timely bet that the market overreacted.
Demand for titanium dioxide is rising, giving Huntsman and Kronos Worldwide (NYS: KRO) the opportunity to raise prices and widen their margins, although higher raw-materials costs for them offset the spread somewhat. It may affect paint makers such as Sherwin-Williams that use TiO2 as a key pigment in their paints, but the chemical companies are better positioned for it. Huntsman, in particular, which now trades at a discount to its peers and is restructuring certain lines to make the whole company more profitable, is perhaps best able to capture the greatest movement higher -- and that's the way CAPS member Mavv21sees it, too.
Tell us on the Huntsman CAPS page or in the comments section below if you agree, and then follow its progress by adding it to your watchlist.
Canary in a coal mine
We probably won't see coal miner Patriot Coal establish a dividend and tie it to coal prices, even though it saw its realized selling price per ton increase in the latest quarter. It also experienced lower production levels as several mines produced less than anticipated, causing it to post wider losses. Patriot expects fourth-quarter costs per ton to fall to the low $70s as a result of higher production.
Yet it still sees strong demand for metallurgical coal, which is why it cast its lot by boosting met-coal production. James River Coal (NAS: JRCC) finds itself in a similar situation, having bought International Resource Partners earlier this year to capture rising met coal prices, only to watch them turn south.
With 96% of the CAPS members rating Patriot believing it will outperform the broad market averages, investor opinion seems to be that the pricing issue is a temporary issue. Add the coal miner to the Fool's free portfolio tracker to see whether it's near an inflection point to capture greater growth ahead.
Have half a mind
Sign up today for the completely free CAPS service, and tell us whether these stocks are twice as good at half the price. Weigh in with your own thoughts on which stocks you think can keep the dogs at bay.
At the time thisarticle was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of Sherwin-Williams. 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. The Motley Fool has adisclosure policy.
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