Going on a bear hunt

Just as there’s something riveting about seeing a giant lizard stomp through a major metropolitan area — New York, Los Angeles, Tokyo — it’s also fascinating to watch the bears romp through the major market indexes.

Godzilla, of course.
Godzilla, of course.

An official bear market begins with a 20% loss. (A correction is a 10% to 20% loss, and an annoyance is anything below that). Right now, the S&P 500 isn’t even in correction territory. But as of yesterday, 115 stocks in the S&P 500, or 23%, were down at least 20% from their 52-week highs.

If you own one of these stocks, it’s a bit like watching your new car squashed like a tin can. But if you’re thinking of owning one of these stocks on a scratch-and-dent basis, some are pretty interesting.

As you can imagine, most of the stocks with big green footprints on their backs are energy companies, such as ExxonMobil, now selling at $77.42 a share, down from its 52-week high of $100.31. Dividend yield: 3.56%.

But ExxonMobil has actually held up pretty well. Apache Oil got squashed to $47.69 from $102.55. And perennially snakebit Chesapeake Energy was compacted to $8.21 from $27.24.

The price of all these stocks, of course, depends on the price of oil, which is now flirting with $43 a barrel. Until oil settles down, it’s pretty hard to argue for a bottom for energy stocks. (Those with long memories will recall that oil traded below $17 in 1998.) Rather than trying to time the bottom, it might be better to wait for a bit of an upswing.

But a few interesting stocks are showing up on bear market list, including:

  • Nucor, the generally admired steel maker, now at $45.29, down from its 52-week high of $58.56. Dividend yield: 3.2%. Part of the reason for the company’s tumble is that China’s appetite for steel is falling, and the economy hasn’t been growing as quickly as some would like. Nevertheless, the company is highly cost-efficient and has a 3.3% dividend, so you get paid — a bit — to wait for business to turn around.
  • Wal-Mart, down 21% from its 52-week high. China’s currency devaluation, announced today, would make some of Wal-Mart’s products cheaper, and low gas prices should translate into higher sales at the nation’s largest retailer.
  • Intel, down 24% from its most recent high. Semiconductor prices have been drifting down this year, while investors have been slamming semiconductor stocks with a hammer. Intel, at least, pays a 3.2% dividend. More aggressive investors might consider Micron, down, 49%.
  • Franklin Resources, the San Mateo-based mutual fund powerhouse. The complex is noted for its bond management, and the Puerto Rico default has been no help at all to the stock. Nevertheless, the company has strong international and domestic stock funds, and typically has a robust profit margin — all thanks to you, investors!

Bear in mind that combing through the new lows list is just the beginning of your research. There’s nearly always a compelling reason for a stock to fall, and it rarely has anything to do with radioactive lizards. But if you’re looking for some relative bargains among high-quality stocks, this might be a good place to start.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s