In December 1974, the Dow Jones Industrial Average broke below 600. It was a devastating collapse, which started with the Dow at 800 at the beginning of the year, and 1000 the year before that. It erased four years of previously hard earned gains.
Sound familiar? Fast forward 35 years, tack on an extra zero at the end of those figures, and it is in the ballpark of what we are experiencing today.
Warren Buffett was profiled that year in Forbes, in which he said he felt "like an oversexed guy in a harem." It closed with his final words: "Now is the time to invest and get rich."
He was not as famous back then as he is now, and so a.) he probably did not get much attention, and thus b.) he was more free to express his relatively unscrutinized opinions. It was a seminal piece that nailed the bottom of the market, and by the mid '80s, the Dow had tripled. The modern version of Buffett's "Oversexed" piece is the New York Times OpEd he wrote last October. Okay, he obviously didn't peg the bottom there, but it doesn't make him any less right.
Now is the time to invest and get rich. Again.
Many American companies are now valued at levels bordering on five-fingered discounts. Consider:
WESCO International (WCC) - Wholesale distributor of misc. maintenance repair products. Made $200 million in 2008, currently valued at $650 million.
Dynamic Materials (BOOM) - Providers of explosion-welded metal to heavy industries. Made $24 million in 2008, currently valued at $93 million.
Innophos Holdings (IPHS) - Makers of specialty salts and acids used in everyday products. Made $200 million in 2008, currently valued at $193 million.
A.C. Moore Arts & Crafts (ACMR) - Self-explanatory retailer. Has a tangible book value of $180 million, currently valued at $28 million.
There are many more names like these out there. They are trading at 3-4x earnings (in IPHS's case, less than 1x earnings), and/or they are trading at a HUGE discount to book value.
Now, some may deserve such lowly prices. But surely not all. Some further due diligence should be able to weed out the haves and have-nots. The point of this exercise is simply to illustrate how hated stocks have become in such a short period of time, and how the bargain bin is jam packed.
I am in concurrence with 1974 Buffett--I feel like an oversexed guy in a harem.
