"Stocks, by just about every long-term valuation measure, are undervalued," says John Reese, who continues to recommend putting money to work in undervalued stocks.
In his Validea newsletter, he selects "undervalued" issues by using screens based on the investment strategies of leading investors such as Peter Lynch, Ben Graham and Warren Buffett. Here's a a look at four current buys in the oil sector.
Reese explains, "If you think you can predict investors' emotional states, or how an unprecedented economic crisis will play out, then go ahead and wait for the bottom. I suffer no such delusions, however.
"Rather than playing the risky game of bottom-calling -- which more often than not leads to investors missing the big initial push of a new bull run -- I'll continue to put money into undervalued stocks.
"And, just as it has tended to do throughout more than two centuries of stock market history, I expect such a practice to yield strong returns over the long haul, regardless of what happens today, tomorrow, or next week.
"Exxon Mobil Corp. (NYSE: XOM) is by far the largest publicly traded U.S. company. The energy giant has a market cap of about $340 billion and has raked in more than $475 billion in sales in the past year.
"In addition to its oil and natural gas businesses, Exxon is also one of the largest worldwide petrochemical companies.
"Exxon is one of only two companies in the market that currently get strong interest from four of my Guru Strategies, earning high marks from the models I base on the approaches of Kenneth Fisher, Peter Lynch, Warren Buffett, and Joel Greenblatt.
"Lufkin Industries, Inc. (NASDAQ: LUFK) Lufkin designs, engineers, manufactures, sells, installs and services oil field equipment and power transmission products for energy firms around the world.
"Lufkin is a small cap, with a market cap of $516 million, but it has taken in more than $740 million in sales in the past year. It gets approval from my Benjamin Graham-, Peter Lynch-, and Kenneth Fisher-based models.
"Oil States International (NYSE: OIS) makes products used in deepwater oil production facilities and sub-sea pipelines.
"It also provides several types of services and products to the oil and gas industry, including production-related rental tools, work force accommodations and logistics, and land drilling services.
"The stock has been pummeled since oil prices peaked last July, but sales have continued to be strong (almost $3 billion over the past year, and more than $900 million in the fourth quarter of 2008, a 55% increase from '07's fourth quarter). It's a small cap, with a market cap of $665 million.
"My Peter Lynch-, Kenneth Fisher-, and Benjamin Graham-based models all give high marks to Oil States.
"The final oil firm added to the portfolio is World Fuel Services Corp. (NYSE: INT), which provides fuel and services to aircraft, petroleum distributors, and ships at more than 2,500 locations around the world.
"World Fuel has 43 offices in 23 countries across five different continents. Its market cap is just under $900 million, and it has brought in more than twice that in sales over the past 12 months. World Fuel gets approval from my Peter Lynch- and James O'Shaughnessy-based approaches."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
4-15-2009 @ 1:14PM
Iridium said...
No stocks are still overvalued. You still have companies that are trading at 20/1 P/E.
We are supposed to believe that 18/1 P/E is undervalued.
Essentially don't beleive a word Buffet says. We must return to realistic valuations of corporations and stocks. We were getting to that but it was interupted by a inside letter to employees.