The significant stock market correction and extreme pessimism felt by many investors has left a number of stocks at valuations that have not been seen in years. It's amazing how fast investors went from talking about growth and not wanting to miss out on stock market gains to hitting the sell button. It seems that much of the market euphoria and now fear are based on emotions.
A new article discusses how emotions can impact investment decisions and states, "Certainly, economic fundamentals play a valuable role in the value of assets and the prices that things trade for. But when individuals are making buy-and-sell decisions they can be very influenced on what is going on in their brains, including emotions,” says Lisa Kramer, associate professor of finance at the Rotman School of Management at the University of Toronto.
Kramer has done extensive research on how human emotion specifically in relation to seasonal depression influences financial decisions and financial markets. "We’re prone to weighing recent information more heavily than more historical information. The fact that we’ve just been through a financial crisis in the last couple of years is looming large on our minds,” she says." Read the article here.
Maybe we are in for a slower economy, but it does not mean the economy is near collapse. Here are a few stocks that investors might have irrationally hit the sell button on, to the point where they are probably at rock bottom values for a longer term investor:
Aercap Holdings, (AER) shares are trading at $10.02. Aercap is a leading aviation leasing company. The 50 day moving average is $11.97 and the 200 day moving average is $13.34. AER is estimated to earn about $1.82 per share in 2011. Book value is listed at $15.32 per share which is significantly less than the current share price. These shares are trading at a substantial discount to the market P/E ratio, and are well below book value.
United Continental Holdings Inc., (UAL) shares are trading at $17.01. United is a major global airline. The 50 day moving average is $20.17 and the 200 day moving average is $23.50. UAL is estimated to earn about $3.57 per share in 2011 and $4.98 in 2012. This puts the P/E ratio at just over 5. Book value is listed at $5.80 per share. Oil prices have been dropping and that is a huge plus for lowering the fuel costs of this major airline.
Royal Caribbean Cruises (RCL) shares are trading at $22.65. RCL is a major cruise line company, based in Miami. The 50 day moving average is $32 and the 200 day moving average is $39.76. Earnings estimates for RCL are for a profit of about $3.18 cents per share in 2011 and $3.82 in 2012. Just as with airlines, fuel costs are a major expense for cruise lines. Rising fuel costs and concerns over the health of the US economy and job growth has been pressuring this stock, however, with this stock trading at about half the level it was at just weeks ago, the selling seems overdone.
Janus Capital Group, Inc. (JNS) is trading around $6.59. Janus is a leading investment manager and is based in Colorado. The 50 day moving average is $8.25 and the 200 day moving average is $11.03. These shares have traded in a range between $5.89 to $14.57 in the last 52 weeks. Earnings estimates for JNS are for a profit of about 87 cents per share in 2011 and 86 cents in 2012. This company has been facing outflows from investors in some of its mutual funds. This reduces fees and profits but, if Janus improves its performance, revenues, profits and the stock could rebound over time.
Microsoft Corporation (MSFT) shares are trading at $24.57. Earnings estimates are about $2.55 for 2011 and $2.76 for 2012. This gives MSFT shares a P/E ratio of only about 9 times earnings. The dividend is 64 cents per share per year which is a yield of about 2.5%. Microsoft has a huge amount of cash on the balance sheet- around $40 billion. Microsoft can still innovate and has some exciting new products like the Kinect which allows people to use their bodies to control and play games without a hand held or other controller. Microsoft's fortress-like balance sheet, low P/E ratio, and strong dividend, makes these shares a low risk way to invest in technology.
Radioshack Corp. (RSH) shares are trading at $11.91. Radioshack operates a chain of specialty retail stores focused on electronics, computers and other items. These shares have traded in a range between $11.58 to $23.38 in the past 52 weeks. The 50 day moving average is $13 and the 200 day moving average is $14.59. Earnings estimates for RSH are $1.67 per share in 2011 and $1.82 for 2012, so the P/E ratio is about 7 on these shares. RSH pays a dividend of 25 cents per share which is equivalent to a 1.9% yield.
The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.