October 29, 2008

Discover Financial Services: Cheap but Risky

I came across this article that states that shares of DFS are a steal at under $12 a share. Yes, you can apply pretty much any financial formula you want to this stock in order to come up with a "cheap valuation" metric, but buying anything in the financial sector in this nervous trading market is risky.

As Buffet said, "In the short term the market is a popularity contest, in the long term it is a weighing machine." Financial stocks may remain very unpopular for quite a while. If you decide to invest, you may have a few years to wait and see a few more dollars fall off of the share price before the market unlocks the value in this stock.

If it gives you any comfort, insiders have been buying shares lately; twice on October 3, and most recently on October 8.

October 27, 2008

$60 Price Target on Mosaic

Notable Calls has noted that Strategic International Securities Research has upgraded Mosaic and given the company a $60 price target.

October 23, 2008

Best Buy on Sale

The Fool points out that shares of Best Buy have decreased 36% over the last four weeks. Shares briefly achieved a new 52 week low today as they dipped under $22 a share. Still, buying shares at $22 could proved to be a great entry point. Consider:

  • Best Buy has not lowered guidance for 2009.
  • $22 per share equates to a current P/E of 7, a forward P/E (FYE March 2010) of 7, and a PEG ratio of .57.
  • The CEO bought shares on October 14 when shares were at $27.60
  • Matthew Paul, who sits on the board bought shares three separate times in October at an average price of $31 a share.
  • The stock will pay a 2.3% dividend while you wait for shares to appreciate.
A quality company that is trading at a new low coupled with insider purchasing? All signs point to buy!

October 22, 2008

Value in Biogen?

Biogen reported earnings yesterday that exceeded analysts expectations, which in turn sent the stock down 8% near its 52 week low of $40 a share. Why? The number of new patients using Tysabri, one of the company's lead drugs did not meet growth expectations.

As the Fool points out, Elan and Biogen had projected that 100,000 people would be using Tysabri by 2010. Now, it doesn't look like that number will be achieved, and other multiple sclerosis drugs could continue to steal away potential customers.

However, growth is growth which translated into a revenue increase of 38% over the previous year. The Fool is still bullish on the stock: "With Biogen trading at less than 13 times its expected adjusted 2008 earnings, the company is a real steal if it can continue to produce adjusted bottom-line growth in excess of 25%. While there's some risk of a slowdown, just like the risk/reward ratio for Tysabri, there seems to be a lot more reward potential than risk built into Biogen's stock price."

Zacks also seems to agree. They call the shares "significantly undervalued," and give the stock a fair value price of $58.

I agree that this stock is undervalued. Revenue and earnings increase and the stock is hovering near a 52 week low? Even if the growth prospects for Tysabri are not what they were first projected, any growth will certainly contribute to the company's bottom line.

October 21, 2008

Value in Blue Chip Stocks

CollegeAnalysts has an article today where they look at some of the more compelling values in some of the blue chip stocks. From the article:

  • Johnson & Johnson (JNJ) is one of the few stocks that I’ve consistently liked. The stock trades for 12x operating cash flow and a historically depressed Price-to-Sales multiple. In a market with reasonable multiples, I think JNJ goes for 3.5x sales and therefore is worth upwards of $85/share – giving investors a nice 25% off sale. The countercyclical business mix should help as well, and the company just reported solid results with 6.4% sales growth and a better than 10% increase in EPS.
  • Something minorly more sensitive to spending patterns like 3M (MMM) is trading for 1.5x sales right now, when the normal multiple converges at or above 3.0x… so while this might imply MMM is a $100 stock, it doesn’t have to be for you to realize good returns. In addition, the 9x operating cash flow multiple shows that there’s plenty of profitability behind those sales.
  • Coca-Cola (KO) is one of the world’s best brands, and it too is being thrown away despite the fairly high confidence most people should have in the continued consumption of the company’s beverages. I think KO should go for at least 4x sales, making this a $60+ stock.
  • Disney (DIS) is trading at similar P/S and Price-to-Book multiples as the stock was at in 2002 – even though cash flow has improved to more than $4 billion in FCF annually. Historical multiples imply DIS is a $40 stock, making this one of the better sales at 35% off.
  • October 17, 2008

    Coeur D'Alene Mines: Oversold?

    The Fool published an article on the 16th regarding Coeur D'Alene mines, a silver miner who has corporate offices in Coeur D'Alene, Idaho. CDE stated on Monday that they expected a 3rd quarter loss of $.01 cents per share mainly due to falling silver prices and increased costs primarily associated with readying a new silver mine in Bolivia for production.

    With the stock price at a new 52 week low, this could prove to be an excellent time to invest in this company provided that the management team can contain costs. According to this article, CDE has already begun to lay off workers at their mine in Alaska. They have also stated that once prodcuction has begun at the Bolivia mine, startup costs will be reduced significantly.

    One other factor to keep in mind is that this is a small cap stock that may be highly tied to sentiment of the market. If you invest, prepare for a roller coaster ride as the price of CDE may ebb and flow with the overall market. I would agree with the Fool author in stating that the stock has been oversold. What is a fair price for a company that reports a $.01 per share loss? It is difficult to say, but a new 52 week low in the stock price with increased production on the way doesn't seem justified.

    October 15, 2008

    A Bottom for Bare Escentuals?

    According to this article, the Fool has picked Bare Escentuals as a Hidden Gems and Rule Breakers selection. With the stock only a few cents from its 52 week low, this may be cause for a buying opportunity.

    The stock does look cheap from a numbers standpoint. Its current P/E is under 8 and its forward P/E (for fiscal year end 2009) is under 7. The stock also sports a PEG ratio of .42.

    The company does seem to have a faithful following of consumers who love their product. In fact, my wife tried their products for the first time a couple of months ago, and just like the women in their commercials absolutely love the product.

    However, with the state of the economy, when her supply of the makeup runs out, we will seriously have to consider if we are going to reorder. Even though the product is great, she would be willing to try one of the other less expensive mineral makeup lines to see if they work just as well.

    I suspect that this may the case for a lot of customers. If belt tightening is going on in households, high priced make-up may be one of the first things to go, and Bare Escentuals bottom line may suffer as a result.

    At this point, I see the stock as a crap shoot, as the stock could continue to fall or shares could begin to recover. Cautious investors may want to wait until their next earnings report to see how the company did in the 3rd quarter and if they issue any guidance for next year.

    October 13, 2008

    Values in Industrial Stocks

    Seeking Alpha has an article that discusses two stocks that appear to be undervalued: Caterpillar and Deere. From the article:

    "Citigroup analyst David Raso set a price target of $65 for Deere (currently at $38) and $72 for Caterpillar (currently at $43)."

    Both stocks also pay a dividend, which at least for the moment appear to be safe.

    October 9, 2008

    52 Week Low on American Oriental Bioengineering

    I came across AOB while reading the Fool today. According to the article, this stock has a PEG ratio of .25 and an estimated five year annual growth rate of 24%? For more inticing numbers, the stock's current P/E is under 8 and its forward P/E is slightly above 5. The Fool also goes on to disclose that they own shares in the company and that AOB is a MF Hidden Gems pick.

    It appears that the Fool is not alone. Zacks liked the stock on August 18, and gave it a $16 price target.

    Stockpickr also liked it in September, when the author said "I'm not selling it till it's above $20."

    With the stock hitting a new 52 week low today, it will be a great time to get in with this company.

    October 6, 2008

    MF on United Health

    According to this, United Health is a MF Stock Advisor, Inside Value Pick and the Fool owns shares of the company.

    52 Week Lows NasDAQ Edition

    The Fool has this article on fresh 52 week lows. Among those mentioned are Electronic Arts, Garmin, and Omniture.

    On Flowserve

    Zacks is out with an article on Flowserve today, which is trading at a new 52 week low. The company is sporting good growth prospects and also pays a dividend.

    Why Not Buy Google?

    The Stockmasters makes a case for buying Google today:

    "If the Internet is the future and SEARCH is everything, Google wins, hands down. There's only one stock I could consider buying at its 52-week low, that stock is Google Inc., today trading in the $360 range."

    October 3, 2008

    RIG for the Long Haul?

    Transocean, Inc. (RIG) has been in the news lately, as shares are historically cheap. Let's look at some of the arguments:

    Zacks has recommended the stock twice in under a week (here and here). The Fool did an interesting stock screen and RIG showed up on the list with a PEG ratio of .38. For what it's worth, Cramer likes the stock too.

    Forward PE comes in at just under 6. According to this article, the company's backlog stands at $40 billion and has a ROE of nearly 40%.

    This stock is screaming CHEAP by many accounts, and with the price near its 52 week low, could prove to be a great entry point into the stock.