5 Beaten Down Stocks I'm Considering Buying Here

With the S&P 500 down about 8.6% for the year, it seems like a good time to look for some bargains among the stocks that I have researched. Some of the cash within my Against the Sky Portfolio needs to be put to work. Below are some additions that will likely occur over the next week provided that prices do not rise about certain price targets.

Automatic Data Processing (NYSE: ADP) - If another market drop occurs, I will look to purchase shares of ADP. I’d like to get shares below $36, which would represent a 25% discount to the probable intrinsic value of $48. The price of $48 per share assumes 12% growth for five years followed by 5% growth for years 6-30. ADP is the perfect stock for this portfolio as it is demonstrating steady earnings growth, continuing share buybacks, and has steady dividend growth. It falls squarely into the large-cap value bucket of the portfolio. ADP will comprise 4% of the Against the Sky Portfolio if Mr. Market will cooperate and give me a deal. Further analysis of ADP can be found here.

Middleby Corp. (NASD: MIDD) - I like Middleby anywhere below $70, but will draw the line at $60 because the market will let me. I don’t believe that Middleby’s customers are suffering as much as the market expects. Innovation has been driving new capital spending cycles. Because of their steady growth and strong management, I think of Middleby less as a small cap stock. Hopefully the market gives me a good deal this week so that the Against the Sky Porfolio will have 3% of its assets in this company. Further analysis of Middleby can be found here.

Dawson Geophysical (NASD: DWSN) - The market priced Dawson shares in the 50s earlier today. In their last earnings call, Dawson indicated that they had enough demand for all crews to be booked well into 2008. If they have enough demand to add more crews later this year, $60 per share will seem like a total gift. Increased channel count alone could drive earnings growth going forward. If the market continues its panic, Dawson will comprise 2% of the portfolio as a small cap growth stock. Further analysis of Dawson is here.

Ctrip (NASD: CTRP) - Ctrip is still priced for some nice growth. The market thinks growth will slow to 30% based on my analysis. That’s an aggressive assumption, but Ctrip has posted growth exceeding 50% over the past year. Margins are very impressive, and the upside is tremendous for this company. The price is too good, and the potential is too great not to add at least a little bit of this stock here. It falls into the small cap allocation and will comprise 2% of the Against the Sky Portfolio.

Jupitermedia (NASD: JUPM) - Jupitermedia is even more speculative than Ctrip, as the company has struggled to integrate its vast acquisitions. Earnings have flatlined for this company, but the market is pricing shares as if it is in permanent decline. Still, there is a great proliferation of new web sites everyday that demands stock photos. Anything below $2.75 per share begs for a purchase. I won’t add more than 1% of the Against the Sky assets to this company, but I want to have some exposure. My full analysis of Jupitermedia is here.

SPY (AMEX: SPY) - Ahh, the grandest spider of them all. This is an efficiently traded fund that matches the S&P 500. A position here will help anchor the portfolio to the market. After fed rate cuts and the shake-out in the financial sector, I can’t help but believe that the second half of 2008 will see some turnaround. It all seems pretty grim right now, but it’s always darkest before the dawn. SPY will comprise 8% of this portfolio within the next week. If the market falls 10% further, I will double this holding yet again.

The recent panic in the stock market looks to be an opportunity to pick up some good companies at good prices. It’s a great time to deploy the cash in the Against the Sky Portfolio. Hopefully by the end of next week, 20% of the portfolio will be invested.

Comments

[Toni:]

Great call! It's at 45 on June 24, 2008.

2008 Jun 24 10:27 AM

[Toni:]

Oh sorry, I was referring to MIDD, forgot to mention it.

"I like Middleby anywhere below $70, but will draw the line at $60 because the market will let me. I don’t believe that Middleby’s customers are suffering as much as the market expects. "

45 !

2008 Jun 24 10:28 AM