When did the stock market begin to resemble a high school caste society? How is it that a few popular sectors gain investors by the handful while more promising industrial fields remain practically neglected? It's as if the Internet has opened the door to a new kind of investor through the democratization of stock trading. Lower barriers to entry along with widespread access have allowed your average Joe to become a do-it-yourself equity owner at a commission rate under $10/trade. Needless to say, with an increasing popularized investment base, equities are finding growing fan groups that are beginning to throw the concept of valuation into question.
For all the hype and potential, it seems as if the Internet world itself has become the object of investment fascination. Amazon (AMZN), the online shopping giant that is likely to secure a place in the hearts of the modern consumer, comfortably trades with a trailing price-to-earnings ratio of 189.47 as of May 3. Recent IPO Angie's List (ANGI), whose losses appear to exponentially accrue in the pursuit for a wider audience, continues to trade with a market capitalization north of $800 million despite a shrinking shareholder equity that is sure to be less than $45 million after the latest quarterly report.
Yet apart from these online movements, even popularized companies such as Green Mountain Coffee Roasters (GMCR) and Netflix (NFLX) continued to invoke memories of a bubbly era that have since proven to be just as easy to pop. After all, people love their K-cups and their movies in the mail. At the heart of the issue remains the common trend that this new generation of investor wants to invest into companies they themselves have partaken in and recognized to be successful. And while not bad philosophy in itself, investors need to understand that regardless of popularized success, valuation will eventually matter. The future of company earnings dictates the present value of a company's stock for a rational audience.
So why follow the crowd? Why pursue irrational valuations when opportunities exist in neglected corners of the market? Why pursue Facebook's (FB) inevitable priced-in growth this coming month when so many other segments of the economy can provide greater opportunities for future value? The following list of companies offer a very short sampling of some alternatives that continue to be neglected. All values were taken as of May 3, 2012.
|Name||Mkt Cap.||Investment Rationale||Industry|
|Bunge (BG)||$9.52 B||Invest into stable trends.||Agribusiness|
|Veolia Environnement (VE)||$6.94 B||Invest into foreign value.||Environmental Solutions|
|Corning (GLW)||$21.2 B||Invest into technology support.||Specialty Glass|
|Solazyme (SZYM)||$594 M||Invest into disruptive innovation.||Conversion Technology|
- Bunge was founded in 1818 and continues to grow as a leader in agribusiness, an industry that continues to prosper as population increases. The American company maintains a global presence where it trades food commodities and manages agricultural infrastructure. The company focuses on its divisions of agribusiness, sugar & bioenergy, food & ingredients, and fertilizer. The company trades with a forward price-to-earnings ratio of 8.9, carries a price-to-book ratio of 0.75, and supports an average dividend of 1.5%.
- Veolia Environnement is the largest environmental solutions company in the world. The French multinational company has operations in 77 countries with over 317,000 employees. Though recently scarred by European uncertainty, an unfortunate accounting fraud, and a cash-strapped customer base, the company still serves as the leader in an industry that is bound to grow when it comes to providing waste management and growing water infrastructure needs. Though cut in 2012, the company maintains a lucrative dividend while trading at a price-to-book ratio of 0.74 and a low price-to-sales of 0.18.
- Corning was founded in 1851 and continues to drive innovation through its own technological advances in the field of glass and ceramics. Despite the old school feel of an ancient art, Corning's glass continues to play an essential role in driving future growth. Corning's Gorilla Glass already plays a vital part in the mobile device industry, but additional advancements have been made that will help the company capture ground in the soon-to-be robust OLED market and solar industry. The company trades with a forward price-to-earnings multiple of 9.21, a price-to-book ratio of 0.99, and recently raised its dividend to the current 2.1% yield.
- Solazyme is a renewable oils maker that utilizes a proprietary process to convert low-value sugars into customizable high-valued end products. The company's oils can be used in everything from jet fuels, to food, to chemicals, and even cosmetics. As a producer of triglyceride oils, the company's market reach touches everything that utilizes oils derived from petroleum, plant oils, or animal fats. Already proven to run on a commercial scale and beginning to pave a path into the cosmetics and food industry, the company is currently in the process of scaling up its production capacity. Solazyme is partnered with an expansive list of large conglomerates which include familiar names such as Dow Chemical (DOW), Chevron (CVX), and Unilever (UN) to name a few. What makes this company so unique is its ability to tailor oils that are fit for industry, but literally do not exist in this world. Such customization is sure to provide a future of disruptive innovation as the company goes about claiming intellectual property in a relatively untapped market space.