Thanks to the volatility and uncertainty caused by Brexit, stock prices are lower today than they were last week. In some instances the decline has made investing in certain stocks attractive again. As Benjamin Graham observed, investing is most prudent when it is businesslike. So to me, when I see a business I like and find that I can buy shares today for 10% or 15% less than the day before, that seems to make better sense than when the price has advanced.
Shares in Potash (POT), the largest fertilizer company in the world, are back below $16 and yielding close to 6%. In addition, Potash has ownership interest in various major fertilizer companies around the world that are worth around $5 a share at today's depressed prices. So investors are paying slightly more than $10 a share today for the lowest-cost potash producer during the down cycle. When the agricultural cycle moves back up -- and it inevitably will -- Potash shares should do incredibly well. You get 6% will you wait.
The automotive industry is going through a dislocation reminiscent of the Internet bubble. On one end you have Tesla (TSLA), which is valued at $30 billion, makes no money, has a going-concern opinion in its financial statements and relies on the issuance of equity to fund its growth. On the other end you have General Motors (GM), which has a market cap of $42 billion, is making nearly $10 billion a year in profits, and pays a dividend of more than 5%. If you had enough money to buy all of Tesla or GM and had to buy one of the two, which would you buy? My guess is the company is that earns $10 billion a year and pays you $2 billion a year in dividends. The decision is no different whether you are buying the entire company or 1,000 shares. GM is a bargain.
Micro-cap biopharmaceutical company Kindred Biosciences (KIN) is trading slightly below net cash value at $3.35 a share. In other words, the entire business, which involves the development of drugs for animals, is offered for free.
Warren Buffett has said the stock market is a relocation center where money is moved from the active to the patient. Brexit has caused the active investor to flee and created an opportunity for patient capital to take advantage of any current and future market dislocations.