Choosing Which Knives to Catch

On Wednesday, I started the search for stocks that have lagged the market badly over the past year and may offer an opportunity in spite of the new highs in the DJIA. I came up with a list of 360 falling knives stocks that are down more than 50% in the past year, and then I started the process of winnowing the list to some investable candidates. The 33 stocks based in China went right out the window. Two were in Hong Kong and quickly joined their cousins in the garbage can. (I will not buy Chinese stocks under any circumstances.)

When I started applying various criteria to my list, candidates started flying out the window because the bulk of them are simply not investable at this time. When I applied the criteria for a perfect stock I found just a handful that are below book value, are profitable and pay a dividend. In this group, Penn West Petroleum (PWE) stands out as an interesting buying opportunity right now. The Canadian oil-and-gas companies have suffered from the price differential caused by lack of pipeline access. At some point, this is going to change and companies such as Penn West will get more favorable pricing.  The stock is down 50% over the last year, trades at 70% of tangible book and is currently yielding more than 10%....495 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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