In the past month, only four stocks in the Standard & Poor's 500 Index have fallen 10% or more.
The four are Newmont Mining (NEM), down 16%; Intuitive Surgical (ISRG) down 13%; Consol Energy (CNX), down 11%; and Allergan (AGN), down 11%). Of the four, I think Newmont has the strongest rebound potential.
Newmont (NEM), the largest U.S.-based gold miner, has been on a long and sickening slide. Its stock price exceeded $60 a share in late 2011, a few months after gold hit $1,800 an ounce.
Gold is now around $1200 per ounce, and Newmont shares sell for about $28, less than half of the peak price. At this level, it looks attractive on several valuation measures.
Newmont was selling on Thursday at exactly book value (corporate net worth per share). It was only 8x earnings, about half the market multiple. And it yields 5% in dividends.
Since Sept. 30, 2011, gold has fallen 49% and Newmont shares have dropped 53%. I did not predict or expect such a decline. But I believe that Newmont is a value at current quotes. And I suspect that if this stock is not at a bottom, it is near one.
Intuitive Surgical makes surgical robots and other surgical instruments, especially endoscopes (devices to microscopically examine internal organs with minimally invasive procedures). The Sunnyvale, Calif., company has been a huge success on Wall Street. In the past 10 years, the stock has risen about 3600%, compared to 102% for the S&P 500.
Sales and earnings have both been growing at a 25% to 30% annual rate the past five years. But there are signs of slowing. The company says it sold 143 da Vinci robotic surgical systems in the latest quarter, compared to 150 in the same quarter a year ago. In dollars, sales of those systems fell to $215 million from $229 million. Such systems account for roughly a third of Intuitive Surgical's revenue.
For this year, analysts expect Intuitive Surgical to show about an 11% sales gain and about an 8% earnings gain. In my view, that's not good enough to sustain the current multiples of 25x earnings and 7.5x revenue.
Consol Energy was over $100 a share in 2008 and now fetches about $28. It is mainly a coal miner, and also produces natural gas. Both industries have been in the tank, and coal faces new, tougher environmental restrictions. With the stock at 16x earnings, I think it has a 50% chance of declining further before it stabilizes and heads up. But a patient investor might like to take a toehold now, and expand it over time.
As for Allergan, a drug company whose best-known product is Botox, it has an enviable growth record, with earnings growth averaging 16% the past five years. It has been the object of takeover speculation, but at 22x earnings and almost 5x book value, it seems fully priced, absent a takeover.