“Be Greedy when others are Fearful” -Warren Buffett-
To anyone interested in taking advantage of the AA+ rating by purchasing undervalued stocks, which are plummeting due to the emotional sell off caused by the downgrade, I have listed a few stocks I believe are worth purchasing and why I believe so.
WELLS FARGO BANK (WFC)
Simply put, the EPS is high (2.57), and it is currently listed at a price of $23.84. Warren Buffett added to his holdings of this stock a while back by 5% and his purchase prices were between $23.25 and $28.57, with an estimated average price of $26.11. The stock is currently priced well below $26.11, and it will probably fall even more this week (making it a better bargain). This line of thinking has served me well, as I bought GE at $9/share after reading that Buffett bought $3 Billion worth of GE at around $12/share back in 2008.
AFLAC (AFL)
Aflac gets 70-75% of its earnings from Japan, and thus the company has taken a hit having to pay out claims engendered by the Tsunami. With the US’s AA+ rating, the company has taken another big hit so the stock price has collapsed (Japan also owns most of our debt after China). Due to it’s size,high EPS (3.81), extremely cash rich business, and niched supplemental products, I have no doubt this stock will prevail after the intense losses it’s suffering due to claims paid out due to the Tsunami. Aflac also is considered the number one brand in the health insurance field. Hopefully this stock continues to fall thanks to the AA+, making it an even more appealing purchase. Did I mention I am a fan of their commercials!??
BRITISH PETROLEUM (BP)
Similar to AFLAC, BP’s stock took a hit due a specific and highly publicized event. The DeepWater Horizon oil spill left the American public with a negative outlook on BP, and BP has to pay huge sums for Gulf Restoration. However, after looking at the numbers (EPS of 6.32) BP will no doubt remain solvent, and prevail after this setback. The AA+ rating has further beat down this stock price, which is currently listed at $38.41.
Please email me at TheRisetoWealth (at) gmail.com if have spotted any other stocks that you think are currently undervalued and worth considering.
CM
I agree with you wholeheartedly on the first point. If the financial crisis intensifies, Wells will be the last big bank standing which makes it a good bet if the market goes up or down.
I agree with your strategy on the second two stocks, but I’m not a fan of stocks with potential hidden liabilities such as those two. For example, I bet a lot of people thought BofA was a good buy until it got hit with a $10Bn lawsuit from AIG. That’s not to say it isn’t a winning strategy. I’m just saying if your going to make bets on an AFLAC or BP make sure you do extra due diligence to really know what you are getting yourself into. It’s a sure way to lose or gain a lot of money.
Absolutely agree – you never know what some of these financial firms really have on their books!