True Story. I've been hooting and hollering about the European Contagion -- hating banks, industrial commodities, shippers, etc for quite a while. Sure, this is going to be a lot of pain. That said, the eternal optimist that I am, I am always up for a good deal. The best way to capitalize is to identify what things are worth that you feel relatively confident in and slowly average down in times of crisis. No need to jump the gun. Cash is still very much king. I want to see growing American companies trading at 1x earnings or less before I start throwing out my all-in cards. That said, here's what I'm looking at now.
Google - (NASDAQ:GOOG) probably isn't going to drop below $500 for very long if it ever does again. It's my opinion that a good way to measure your ability to generate above average returns should perhaps be measured in shares of Google. I believe Google is ridiculously undervalued, especially when you take into account the fact that Android is destroying the tablet and smart phone market. I think Google is one of the easiest to find undervalued companies in existence.
Lee Enterprises - (NYSE:LEE) Lee is on the bankruptcy chopping block and has gone as far as to mention in its 8-K that their latest deal, if not approved by 95% of its lenders, would end up in Chapter 11. They already have more than 90%. The negatives as I see them on top of this are the fear of declining share price, the fact that they still have to arrange a $175M loan still to be arranged. Assuming this additional $175M loan comes in at 15%, this would effectively double their borrowing costs year over year from 4.93% to 10.2%. This effectively costs an additional $55M per year. In the last 12 months, Lee has paid off over $102M in debt. Not bad for a post-financing fully diluted market cap of $35M. Seems cheap to me. I figure that without the bankruptcy risk this is worth at least $3, which suggests that the market is saying that it is 80% likely that LEE goes into bankruptcy. I disagree and that's why I own. In a few years, if CEO Mary Junck is right and things improve, LEE could be worth even more. Note that Lee used to be over $40.
Gannett Co., Inc. - (NYSE:GCI) has a dividend yield of 3.2% and a P/E of around 4. It's pretty straight forward to me that they are worth a few more bucks at this price and that over the next 10 years I'd rather own GCI than U.S. Treasuries. That said, in an environment filled with falling prices and unsustainable European macroeconomics, the deal still isn't good enough for me to bite.
Pick Your Risk
I figure that all of these companies are definitely value situations. The riskiest of the three is Lee Enterprises and the safest of the three is Google. Pick your risk level accordingly but note that Google was trading at about this multiple back at its lowest point of the crisis in 2008-2009.
Disclosure: I am long LEE.