Buffett, the most well-known value investor of all time, is usually amazed when stock prices fall so low: "When hamburgers go down in price, we sing the 'Hallelujah' chorus in the Buffett household. When hamburgers go up, we weep. For most people, it's the same way with everything in life they will be buying -- except stocks. When stocks go down and you can get more for your money, people don't like them anymore."
In a recent story, I noted there could be opportunities, given the sour sentiment and drop in the stock market over the past several weeks. Although stocks have risen over the past few days, investors can still find cheap "hamburgers" if they look hard enough.
I used TheStreet Ratings' quantitative equity model and picked the highest-rated companies that have underperformed their industries over the past three months (by at least 7%).I also looked for companies that ranked in the top two quintiles (the lower, the better) of PEG ratio (price-to-earnings divided by expected earnings-per-share growth) within their sector. That would highlight companies that are undervalued relative to their peers. So here are the highest-rated stocks for each of the 10 sectors, with returns as of June 20.
1. Alliance Holding (AHGP) is a diversified coal producer with mining operations in Kentucky, Indiana, Illinois, West Virginia and Maryland. The stock has slumped 18% in the past three months due to a secondary offering of 2.75 million shares, which was released in April for $52 a share. Shares are now trading $6 below the offering price. Management has stepped up and put its own money to work with CEO Joe Craft buying $3 million worth of stock last week. The company pays a dividend of $2.22 a share, with a yield of 5%. Alliance trades at a discount to other coal competitors at a P/E of 15. With expectations calling for 20% growth, the shares look attractive. TheStreet Ratings has a $61 price target on Alliance.
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