The predators are very wily and use stealth. Unlike the herd, they make their meals by catching the herd off-guard. It's like shooting deer fixated by headlights, and it works every time.
The herd will pay almost any price to buy something that the rest of the herd is buying. The predators have their sights set on companies that almost no one wants.
The herd doesn't want to touch companies like Barrick Gold (ABX). Even though it is by many measures the largest gold-producing company in the world, and even though it pays a current dividend of 2%, it gets little if any respect (like the complaint of the late Rodney Dangerfield).
The predators know that Barrick Gold is selling at a forward P/E ratio of 6.88 and has a PEG ratio (5-year expected) of a deliriously low 0.24 (any PEG ratio below 1 indicates serious undervaluation).Or take Nabors Industries (NBR). Nabors? Are you crazy? The herd would rather you take its wives and husbands than buy a stock selling at a price-to-sales ratio of 0.58 and a price-to-book ratio of 0.65. Put another way, Nabors is selling at almost half of what you could get if you auctioned off the company's assets, subtracted its liabilities and divided what is left among shareholders. Ludicrous! By the way, Nabors has an unbelievably low PEG ratio of 0.29. NBR is a company that in the trailing 12 months made $6.58 billion in revenue. That's $22.86 per share in revenue. In its year-over-year quarterly earnings it announced growth of 62%. Yet, on Monday the stock was selling for $13.04 while the book value per share is $20. Out of 21 analysts who cover Nabors the mean target price is $25.10 and the median target is $26. With a forward PE of around 5, you'd think this company sold hula hoops or portable radios. Instead, this former contract land energy drilling services company has been actively expanding into new business opportunities globally. As its informative website explains, "These businesses provide our customers with information technology, drilling systems, engineering, transportation, construction, maintenance, well logging and other support services in selected domestic and international markets."
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