• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

More Stocks Edge Into Bear-Market Territory

Which makes them more attractive to buy.
By TIM MELVIN Sep 01, 2015 | 02:00 PM EDT
Stocks quotes in this article: KELYA, NWPX

As stocks continue their fall today, I have to confess that I get a huge kick out of all the commentary surrounding the whys and hows of the decline.

China gets most of the blame for the fall. One very learned-looking fellow on TV opined this morning that all we need to do is figure out if the China decline was going to continue and keep the United States from growing and then act accordingly. That's a relief. All I have to do is figure out the economy of a communist nation whose government is probably making their numbers up out of thin air for purposes we cannot determine and investing success is mine!

The most repeated comment I am hearing is that many stocks are already in bear-market territory, having fallen more than 20% this year. In fact, a quick check on the S&P 500 shows that 81 stocks, or about 16% of index components, have hit the magic 20% decline level that the experts tell me is bear-market territory. Sixteen of those are in the energy business, so that leaves us 65 companies or just 13% of stocks in the S&P 500 that are already in bear-market territory. One hundred seventy-eight stocks are down 10% or more, so only 36% of the index stocks are in what is commonly thought to be a correction.

I took the "stocks already in a bear market" idea one step further and ran some basic screens and added a bear-market component status to see what I could find. I ran my basic Walter Schloss screen this morning that looks for safe and cheap stocks with insider ownership levels that indicate management has some skin in the game. I then limited the list to just those that were down 20% in 2015 and could be considered as being in a single-stock bear market. I found just 43 stocks that qualified and only 14 of them were larger than $100 million in market cap. Twenty-three were larger than $25 million, so it is hard to say this market pullback has created a bunch of safe and cheap stocks so far.

Having said that, there are some interesting names on the list. Those of you who are familiar with the concept of cash secured put selling should take note that I would consider these cheap, beaten-up stocks to be great candidates for selling puts on full margin to back into the stock at a lower price. Volatility is back at levels where you can get paid for selling puts, so I would break out that tool in the current environment.

Kelly Services (KELYA) is one of the largest staffing and workplace solutions companies in the world. It employs directly and indirectly through strategic partners more than 1 million around the world. The global economy is struggling, but Kelly has been able to grow earnings at more than 15% a year and I see no reason it can't maintain that level. In addition to an eventual pickup in hiring, Kelly has some new projects in talent supply chain analytics that could be a driver of long-term growth. The stock is trading at just 65% of book value, so it's certainly cheap. Kelly has very little debt on the books and is financially strong enough to survive until it can thrive again.

Northwest Pipe (NWPX) is another stock that has fallen into its own personal bear market and might be worth buying here, if you haven't already. The pipe and tube company recently announced it is selling its energy-related tubular products business to focus on the core water transmission and wastewater infrastructure business. Water-related infrastructure is going to be a huge business in the years ahead as we repair outdated existing plants and take steps to help provide water to drought-stricken parts of the country. Northwest Pipe could well end up being a growth stock and market darling over the next decade, and right now we can buy it very cheaply. At today's price, the stock trades at just 70% of book value. The balance sheet is solid and long-term owners of this company should do very well.

As stock prices are falling again today, we are seeing a few stocks drop into bear-market territory and become candidates for buying, or -- for those experienced in such matters -- cash secured put selling. However, it is not as widespread as the TV taking heads might want us to think. In the immortal words of Hill Street Blues' Sgt. Phil Esterhaus, "Let's be careful out there."

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Melvin was long NWPX, although positions may change at any time.

TAGS: Investing | U.S. Equity | Stocks

More from Stocks

As We Come Back From July 4, Market Fights a Hangover

James "Rev Shark" DePorre
Jul 5, 2022 4:22 PM EDT

After a rough start, we saw strength in some sectors that had taken it on the chin.

What's the Next Move for Crude Oil?

Bruce Kamich
Jul 5, 2022 3:30 PM EDT

A temporary break in oil prices, along with lower interest rates, could be a near-term positive for equity prices.

Can Nvidia Rally and Help the Tech Sector Recover?

Bruce Kamich
Jul 5, 2022 3:00 PM EDT

Why Tuesday could mark the start of a turnaround.

Tesla's Charts Are Resisting a Downside Break

Bruce Kamich
Jul 5, 2022 1:54 PM EDT

Here's what aggressive traders could do.

We Can't Predict the Rest of 2022, but We Must Have a Game Plan

Brad Ginesin
Jul 5, 2022 1:30 PM EDT

Many are forecasting bad times ahead, but are they going to extremes? Here's my strategy for the the second half of the year.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:01 PM EDT PAUL PRICE

    A Recent Director Buy in Children's Place (PLCE)

    Four of the most recent insider trades in Children...
  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login