3 Pullbacks Worth Buying
Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Stocks can sell off for numerous reasons, but sometimes the drops are way overdone. Most of the time it is smart to stay away, but when it happens to one of the best companies in an industry, you need to take a close look and consider buying. Three companies have not participated in the market rally and have actually come down a significant percentage from their highs. These three companies are Intuitive Surgical (NASDAQ: ISRG), Verifone (NYSE: PAY), and Icahn Enterprises (NASDAQ: IEP).
One of the most unwarranted selloffs I have ever seen happened to Intuitive Surgical. Their robotic surgical equipment is being questioned as to whether or not they are truly a better alternative to regular surgery. After taking a look, I laughed. The robotic surgeries Intuitive's products are able to do are less invasive and often require a shorter recovery time. By just comparing pictures of the incisions and scarring afterwards from both robotic and regular surgery, the robotic procedure wins hands down. Not to mention the surgeries are often quicker and less costly.
Intuitive's stock has fallen from over $580 to under $470 today. Intuitive Surgical has come out and defended its products and they will continue to do so. I believe all of this will blow over and the products will continue to have full approval. This would send the stock soaring and back towards its 52 week high.
Verifone's share price was cut in half after it pre-announced in February that its first and second quarter earnings would miss expectations. First quarter expectations were now between $0.47 and $0.50 compared to previous estimates for $0.73. Even worse, second quarter earnings are now expected to be between $0.45 to $0.50, compared to previous estimates for $0.80.
The stock fell from over $31.50 to $18.24, a decline of more than 42%. They are over 60% below their 52 week high of $55.89, reached back in April of 2012, and may never see those levels again. However, I do believe the stock could easily run back to the high $20 range. They already beat their own first quarter guidance, providing a little boost. The biggest positive was the stepping down of their CEO. New management may be just what this company needs.
The downward guidance of earnings was a huge disappointment, but with current estimates and the current share price, Verifone is a great value at just $20.75.
Icahn Enterprises dropped over 12% on Feb. 28 after announcing they would be offering 3.2 million shares of depositary units for $63 per share. The stock was trading around $71.50 at the time, so of course the stock was going to drop to around $63. However, the stock continued lower to $60.05 and is currently trading around $60.40.
This is a very strong company, much like the man who founded the company, Carl Icahn. The dividend was recently increased from $1.40 to $4.00 annually, and now yields 6.6%. With the strong investments they have been making and the success of the CVR Refining IPO, which they made happen, I think their earnings will continue to rise and send the stock higher.
The Foolish Bottom Line
These three selloffs are providing buying opportunities. The downside is more than factored in to all of them, so I believe a run higher will happen within the next few months. The least worrisome of the issues discussed was that of the depositary units by Icahn Enterprises, so this would be the "safest" of the three. I bought shares in all three of these companies after the initial drops and will continue to add to my positions if they head lower. I believe in these companies and do not have any doubt that they will get through current struggles. These all are long-term investment ideas, so do not be scared if they continue to trade erratically for the next week or two.
Joseph Solitro owns shares of Icahn Enterprises L.P., VeriFone Holdings, and Intuitive Surgical.. The Motley Fool recommends Intuitive Surgical. The Motley Fool owns shares of Intuitive Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!