Fresh Bargains Appear as Market Falls

 | Jun 21, 2013 | 12:00 PM EDT  | Comments
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Stock quotes in this article:

gci

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blc

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nem

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cvr

Smack! Stocks caved Wednesday and Thursday on news that the Federal Reserve will gradually reduce its program of expanding the money supply.

The two-day decline in the Standard & Poor's 500 Index came to 3.8%. My guess is that we are in the midst of a normal correction, and that it will end in July. A 10% correction occurs, on average, about once a year.

Because I don't believe this is the start of a bear market, or even an especially severe correction, I am on the lookout for bargains. I believe a few new ones are starting to appear. Here are three of them.

Gannett (GCI), the newspaper and television group, has fallen 10% in the past week, after rising 50% this year through June 13. Some of the rise came as investors reacted favorably to news that Gannett will acquire Belo (BLC), a Dallas media company that owns 20 television stations. The consensus is that Gannett will fare better if television accounts for an increased share of revenue, and newspapers a decreased share.

Analysts expect Gannett to show an increase in earnings this year, and next year. The stock offers a dividend yield of 3.4%. And it sells for a modest 10x earnings.

Newmont Mining (NEM), the largest U.S.-based gold miner, fell about 9% in the past two days and almost 12% in the past week. If the Fed is printing less money, gold -- which has the reputation of being a good inflation hedge -- may do a bit less well.

Newmont, which I have owned in the past but do not own for most of my clients, seems to have fallen to the point where it is a good value. It sells for less than nine times earnings and affords a 4.7% dividend yield.

CVR Energy (CVI), a refiner based in Sugar Land, Texas is a third stock that I think is appealing after this week's decline. It has dropped in nine of the past 10 trading days, partly because gasoline and jet-fuel inventories are higher than usual now. I expect those inventory factors to normalize.

CVR looks mighty cheap to me at about 6x earnings and 0.5x revenue. It also offers a dividend yield very close to 6%.

If the market downturn continues for another week or two, as I think likely, there will be many more bargains surfacing. If I am right that the downdraft will end next month, those bargains will definitely be worth snatching.

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