Science & Technology
Science and Technology
Science and Technology
Tue, August 31, 2010
Mon, August 30, 2010 
CHICAGO--([ BUSINESS WIRE ])--Today, Zacks Investment Ideas feature highlights: Features: ReneSola Ltd. (NYSE: [ SOL ]), Sandisk Corp. (Nasdaq: [ SNDK ]), Xyratex Ltd. (Nasdaq: [ XRTX ]) and Ford Motor Company (NYSE: [ F ]).
"be greedy when others are fearful and fearful when others are greedy."
Scared? Buy These 4 Unloved Stocks
There is an old investment saying that says "be greedy when others are fearful and fearful when others are greedy." The premise behind this peculiar phrase is that it pays to be a contrarian, a dynamic that we have seen play out time and time again over the years.
Take the technology bubble of the late 1990's for example, when your grandmother and the mailman became experts at analyzing tech stocks, dishing out hot tips on unprofitable Internet companies to anyone who would listen.
What about housing? Back in 2005 and 2006 flipping houses was the hot new get-rich-quick scheme, with former bench warmers singing the praises of how easy it was to make money in housing because prices "never go down."
Well, we all know how both of those stories ended, perfect examples of how it paid big to be hitting the sidelines and taking profits just as the masses were piling in.
Fear Grips the Street
But the other side of the conversation is just as compelling, knowing when it's time to capitalize on the fear of others. And when you take a quick look at the current investment landscape, its easy to see that there is no shortage of fear on the Street.
The first place we see that fear being expressed is valuations, where the S&P 500 is trading at a historically cheap 13X forward earnings. That discount becomes even more pronounced within the context of low interest rates and low levels of inflation, forces that traditionally worked to drive equity valuations higher.
The second place we see fear is in the balance sheets of the S&P 500 companies, whose collective cash balance has now swollen to $1.8 trillion over fear and uncertainty over a number of lingering issues.
Another expression of the fear that is gripping the Street is the record inflows that the bond funds have experienced over the last two quarters, where investors are happy to smash yields into the ground just to be assured of getting their initial investment back.
Is It Time to be Greedy?
So as you can see, there are multiple leading indicators telling us that investors have been so rattled by the financial crisis of 2008 and persistent market volatility that they continue to avoid some very compelling opportunities. Which means this could be a very good time to start thinking about being extremely greedy and buying some unloved stocks that could fall back in favor on a shift in sentiment.
Here are 4 extremely unloved stocks with very low P/E's and high Zacks Ranks that could give your portfolio a nice boost in the long run.
4 Unloved Zacks #1 Rank Stocks
ReneSola Ltd. (NYSE: [ SOL ]) is a manufacturer of solar wafers and components out of China with a market cap of $677 million. In spite of the company's strong profile, fresh off the heels of a solid Q2 performance that saw sales jump 24% last year, this Zacks #1 rank stock trades with a forward P/E of 5.8X compared to the industry average of 12.09X. On the chart, shares are pressuring the multi-year high, take a look below.
Sandisk Corp. (Nasdaq: [ SNDK ]) is another company that has been posting big revenue and earnings gains yet remains extremely undervalued relative to the industry average, with a forward P/E of just 9X. The maker of flash-drive storage products has an average earnings surprise of 144% over the last four quarters while expectations have been steadily rising. Take a look at the chart below for this Zacks #1 rank stock.
Xyratex Ltd. (Nasdaq: [ XRTX ]) is one of the cheapest Zacks rank # 1 stocks on the board, trading with a forward P/E of 2.8X compared to the industry average of 18X. Two words come to mind here; holy value! Although shares of this data-storage devices maker are down over the last few months, the long-term view could be juicy as the Street begins to appreciate a company with strong revenue growth and significant barriers to entrance. Take a look at the chart below.
Ford Motor Company (NYSE: [ F ]) has been one of the big domestic success stories of the last year, as the company has posted excellent results in the face of a very challenging consumer environment. Yet shares remain extremely undervalued, trading with a forward P/E of 6X compared to the industry average of 16X. With a projected 5-year growth rate of 13%, the long-term view looks good for this Zacks #1 rank stock.
So as you can see, the current wave of fear that is running through the market has pushed down the valuations on some really excellent stocks deep into value territory. It could be an opportunity to give your portfolio a boost with some outsized returns in the long run.
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