7 highly rated stocks on sale

Dynamic Materials is among companies that remain well-regarded by the MSN Money CAPS community despite being beaten down over the past month.

By Caps Editor Feb 10, 2010 2:02PM

This post comes from The Motley Fool's Matt Koppenheffer.

 

I'm always looking for a good deal, whether that means buying an extra box of Golden Grahams when they're on sale or pouncing on an undervalued stock.

 

The idea that anybody would sell a stock for less than it's worth might 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 guy named Mr. Market, who pays you daily house calls, offering to sell you interest in businesses he owns or to buy interest in businesses you own.

 

Sometimes Mr. Market shows up at your door very excited, offering you premium prices for your holdings. Other times he's totally depressed about the future, offering to sell you what he has for as low as pennies on the dollar.

To find some of the stocks that Mr. Market is depressed about, I've turned once again to our MSN CAPS investing community. Each of the companies below merited the community's highest rating (five stars) just 30 days ago.

 

The stocks listed below are all still very well-regarded despite their dismal performance over the past month. While these aren't formal recommendations, they could be a great place to kick off further research.

 

Applied Materials (AMAT) is the world's largest maker of equipment used to manufacture semiconductors. Its shares are down 16% over the past month. At CAPS, the stock has a four-star rating.

 

Dynamic Materials (BOOM) uses explosives to do metal cladding on plates used in energy, shipbuilding and other industries. Its shares have slid 25% over the past month. The stock has a five-star rating.

 

Joy Global (JOYG) makes mining equipment. Its shares have shed 24% over the past month. The stock has a four-star rating.

 

Quality Systems (QSII) provides information-management software for the health care industry. The stock is down 21% over the past 30 days and has a five-star rating.

 

Suncor Energy (SU) develops Canada's Athabasca oil sands. Its shares are down 22% over the past month. It has a four-star rating.

 

Tata Motors (TTM) is India's largest automaker by sales. Its American depositary receipts are down 17% over the past month. The company rates five stars.

 

Western Refining (WNR) converts crude oil into gasoline and other fuels. Its shares are down 25% over the past month. The company has a five-star rating.

 

Why so blue?
I used to be a fan of the Yahoo Finance message boards. It was an unhealthful addiction, like staring at a car wreck.

 

One thing I could count on from those message boards, though, was that if a stock ever moved one way or another without any significant news, somebody would inevitably start the chant of "somebody knows something."

 

As in somebody has gotten his hands on information that the rest of the market isn't privy to and is selling like crazy as a result.

With no significant recent news, then, the big drop for Dynamic Materials' stock over the past month must mean somebody knows something, right?

 

Probably not. What I figured out pretty quickly is that 99 times out of 100, the "somebody knows something" chant is total and complete malarkey. There are myriad reasons a stock might make a significant move without any news, but the important thing for any fundamentals-focused investor to remember is that when the business hasn't changed but the price gets lower, the stock gets . . . what's that word? Oh, yeah, cheaper.

 

What the bulls say
The recession has been pretty ugly for Dynamic Materials. If analysts' estimates are accurate, the company will report 2009 earnings that are down 63% from the previous year. This is, of course, the kind of thing that happens to cyclical companies when they find themselves in the midst of a downturn.

 

The flip side is that analysts expect the company will benefit greatly from the budding economic recovery and will nearly have doubled its per-share earnings between 2009 and 2011. And with growing end markets around the world -- roughly 65% of the company's sales are to customers outside the U.S. -- it seems likely that the growth will continue beyond 2011.

 

CAPS participants have been a bullish bunch on Dynamic Materials. Among the 1,523 CAPS members giving Dynamic Materials a thumbs up is "dhabluetzel," who rated the stock an outperformer in late 2008, citing long-term demand for its products.

 

"Providing corrosion protection cladding for base metal sheets is in demand in industry," the CAPS All-Star wrote. "Many processes utilize highly corrosive chemicals to join polymers to produce raw plastic for industry. The oil patch also uses these end products (clad metal) in the construction of refineries which are going to have to be built to keep up with demand and replace ageing plants."

 

Do you think the recent drop has created a good buying opportunity? Or will Dynamic Materials' shares continue to struggle? Head over to CAPS and share your thoughts with its 145,000 members. Even if you'd prefer to pass on Dynamic Materials, you can check out some of the additional 5,300 stocks rated there.

 

More from The Motley Fool:

 

The wealthy are freaking out -- and so should you

 

What will you regret not buying in 20 years?

 

Now is the time to upgrade your stocks

Tags: CAPS
1Comment
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

115
115 rated 1
269
269 rated 2
445
445 rated 3
614
614 rated 4
684
684 rated 5
678
678 rated 6
608
608 rated 7
454
454 rated 8
310
310 rated 9
138
138 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.