Security Analysis

Take Control of This Market

Without a doubt this weekend’s news was the major spike in oil and the stock markets huge loss on Friday. Of course, when these types of days happen, CNBC has to do some sort of special to show us how the world is going to end, in this case they did a special on America’s oil crisis. I wonder if one day they will do a special on the many bargains the market is starting to offer.

Who would have thought we would see Wells Fargo @ $25. GE at $30 anyone? Fortunately for us “small” investors, volatility is our friend. Wall Street is wired a bit different than value investors. They have a buy high and sell higher mentality or my favorite, buy high and sell lower. Nevertheless, this is exactly the wrong thing to do in markets like these. In total, I read about 10 articles that dealt with “how the market is risky due to Friday’s loss”. I read another 5 on “how bonds are safer than stocks and where to put your money.” I immediately took out my highlighter and headed for the stock tables.
There are several interesting names approaching interesting levels. Companies like Coca-Cola (KO), Proctor and Gamble (PG), Pepsi (PEP) , United Technologies (UTX) usually trade at higher multiples than they are trading at today. But those companies are too big for my liking. A Company like Johnson Controls (JCI) has more room to grow and is attractively priced at these levels.

Johnson Controls is currently trading at multiples it has not seen since the turn of the millennium. Although, it will not provide catastrophic returns, JCI should do fine as the economy and the market recovers.

This company supplies building controls and energy management systems, automotive seating, and batteries. -S&P Report

Below are some of the numbers
P/E: 14
Forward P/E: 11
ROE: 15%
ROA: 5%
EV/EBITDA: 8

Disclaimer: I own shares of JCI through an investment club

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© 2008 Contrarian Value Investing.