Weekly Bargain Bin Blue Chips Update Q2 Week 10187 views 2012-06-09 16:58 Tags: blue chip dividend bargain bin
Blue chip stock (my def.) = minimum market cap 1B + minimum 10 continuous years of dividends.
The DJI closed at 12,554.20 today, up +3.59% from last Friday's close. The Dow is now up +89.44% from its 5-year low on March 6, 2009 and down -5.88% from its recent high of 13,338.66 on May 1.
One of the main determinants of a stock's cheapness or expensiveness is price per book value. I don't understand the "fair-value" system, the followers of which go and add on an extra 20% or so to a stock and call it a fair price. The whole point of buy-low-sell-high investing is not to pay a fair price for a stock. I thought the whole point is to pay below fair price taking advantage of Mr. Market's mood swings. Sure, if you are dollar-cost-averaging then fair value might be okay. Since I am a bargain hunter, I prefer to pay below "fair value" and if possible below half of price/book value.
Market Price = Book Value + Premium for future growth.
The risky part of looking to invest money into bargain bin stocks
however, is that the business fundamentals of those companies may be
impaired - especially those that are at half of book value while the
general market is still overvalued. Something wrong somewhere right?
That is yet another reason why DIY investing is not easy. Who has the willpower or free
time to comb through business financials of an undervalued company
looking for problems that might keep share price suppressed or declining
forever? It is arguably easier to comb through financials of healthy companies, looking for reasons why share prices will keep going up forever. LOL
Below are the six bargain bin'ners and twenty-five near-bargain-bin stocks from my list of blue chips.
The following blue chip stocks deserve honorable mention for their proximity to 0.5X book value.