The market selloff of the past two weeks is starting to have some legs. The S&P 500 is off almost 10% since it touched 950 a few weeks ago. There’s a good chance it could go lower if companies forecast a slow second half of 2009.
Times like this is when the buying opportunities emerge. Remember four short months ago when you could have picked up Goldman Sachs at $73 or Central European Distribution at $7? Goldman is up nearly 100% and CEDC more than 300%. As markets go lower, investing in quality companies becomes an even better opportunity.
The economy and the market are still very fragile, which means we could have a quick shake-up that gives investors another chance to pick quality names at historic bargains. Consider the following names that are good bets now but could be excellent buys if we see a continued market shake-up over the next few weeks.
Florida landowner St. Joe is an excellent idea that will reward patience. Today, no one wants to buy real estate, so land prices are being given away. Making money in land is painfully simple: buy it now when no one wants it and sell later when folks start buying again.
But even more with St. Joe, it’s a debt-free land company, one of only two I know of with the other being Tejon Ranch in California. When your predominant asset is raw land, debt is extra painful because there is no consistent way to service it.
Over 90% of Joe’s 560,000 acres is developable and lots of that land is waterfront. That land is significantly undervalued today but will soon shine again. The biggest near-term catalyst with St. Joe is the coming Panama City, Fla., airport next year. The airport is smack in the middle of Joe’s land. And with airports come hotels, restaurants, gas stations and a host of other businesses that cater to the thousands of daily travelers.
AgFeed Industries is a leading producer and supplier of animal feed and live hogs in China. It should do exceedingly well over time as the Chinese consume six times more pork than the next leading pork consumer. Over the past few months shares have surged from $3 to nearly $7 but have since come down to $4.30. Any opportunity to acquire this company at less than $4 offers a quality long-term bet at a good price. That would imply a P/E of 6 for a business that is growing both top and bottom line by over 20%.
China’s market has been on a tear lately as increased bank lending has certainly made its way into the system. Such a nice rally has many calling for a pullback. It that happens, then investors should not ignore the opportunity to buy simple boring businesses in arguably the best long-term growth market today.
Finally Argentinean agriculture company Cresud will benefit from the long-term need for more grains and meat in the world. At $9 per ADR it is trading below a conservative true book value figure of about $15 to $20. Stated book value is useless since Cresud’s biggest asset — land — appreciates over time.
Owning any company in Argentina today may seem risky due to the recent actions of the government. But you can be comforted by the fact that Prem Watsa at Fairfax Financial and the guys at Leucadia both own big blocks of Cresud.
Fellow RealMoney contributor Jon Heller penned a great piece on Cresud several months ago when the shares were in the teens. The share price is down, but his thesis hasn’t changed at all.
In all honesty, I would welcome some negative earnings announcement and weaker-than-expected forecasts. The markets are so shaky today that just a whiff of negative sentiment can send shares down to irrational levels.
We all want to make money from investing and the odds go up each time the share price of a perfectly sound business heads lower. With a little patience, good investment performance can become excellent investment performance.
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