May has been a lousy month for stocks so far. I don't have to tell you that.
But if it's been a bad month for stocks in general, it's been a really bad month for riskier, higher-beta stocks. Which makes sense -- by definition, higher-beta stocks tend to rise faster than the average, but they also fall harder than the average. By and large, that's made it a pretty painful experience for my portfolio of bargain stocks.
There's a silver lining, though. As my bargain stocks get cheaper, there are other stocks that are entering bargain territory or becoming even bigger bargains. So perhaps it's time to do some shopping.
Here are five stocks that caught my eye.
MetLife (NYS: MET)
Sony (NYS: SNE)
Research In Motion (NAS: RIMM)
Hercules Offshore (NAS: HERO)
Trina Solar (NYS: TSL)
Source: S&P Capital IQ.
Off-shore driller Hercules Offshore is a potentially tempting pick. I highlighted the stock in late 2010 and it shot to the moon shortly thereafter. Now, with the stock coming back to earth, is it time for a second bite at the apple? I'm not so sure. Since the last time I gave the stock the nod, the company hasn't really improved its position. Net debt on Hercules' balance sheet is down, but its operating loss has expanded and EBITDA has fallen, putting the company in a more precarious position. Day rates have been increasing and that could be the start of a turn for the company, but it's hardly a slam dunk.
While I may be just lukewarm about Hercules, I'm downright cold on Trina Solar. As I previously noted with competitor First Solar, being an early mover in a developing field is wrought with danger. I'm actually excited about solar over the long term, but it's highly questionable which of the companies that exist today will still be around for that bright future.
The remaining three stocks -- MetLife, Sony, and Research In Motion -- will all be added as "outperforms" in my CAPS portfolio and become serious buy considerations for my "bargain basket" portfolio.
There's a lot about Sony that's ugly right now, particularly if you're looking at the company's financials. But the Sony brand is a strong one and this is a huge, diversified conglomerate that extends from TVs to video games, movies, and life insurance. I'm willing to bet that there's more value still here than the market is giving the company credit for.
Research In Motion is yesterday's news as Apple and Google are absolutely dominating the mobile-phone market these days. But what I can't help noticing is that the company is still plenty profitable, still earns a fair return on its equity, and has a very clean, debt-free balance sheet. It's dicey to bet on a business that's getting beat up by the competition, but RIM's financial strength may put the odds in investors' favor.
Finally, MetLife has its challenges -- it could be hampered by being labeled a "systemically important financial institution"; it's making a strategic shift away from variable annuities and toward accident and health insurance; and there are concerns around its investment portfolio -- but these strike me as shorter-term speed bumps as opposed to long-term cripplers. In that light, I think the market has discounted the stock too much for those fears. With shares currently fetching about half of book value, versus pre-recession multiples well above book value, I think this may be the best bet of the group.
A safer choice
If carefully managed, I think a diversified portfolio of these bargain stocks can be a solid play for some investors. However, the volatility and boom/bust outcomes may make it too stomach-churning for other investors. If the above picks sound too wild for your portfolio, you can find picks that will let you sleep much easier in The Motley Fool's special report: "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can even snag a free copy of that report by clicking here.
At the time thisarticle was published The Motley Fool owns shares of Google and Apple. The Motley Fool has sold shares of Sony short. Motley Fool newsletter services have recommended buying shares of Apple, First Solar, and Google, as well as creating a bull call spread position in Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.
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