Daktronics Inc. (DAKT)

[chmcnfunds]

4 Potentially Undervalued Stocks to Take Advantage of the Sell-Off

By Joel Anderson September 3, 2015 7:09AM

Well, it’s been a long time coming, but we appear to have our correction. After a lengthy bull market, we have a sharp, distinct pull back that has brought things down from the clouds. However, despite the doom and gloom coverage that seems to be flowing in from major media outlets that usually can’t muster much more market coverage than a daily check-in with the world’s worst stock index, there’s plenty of reason to believe that this won’t necessarily extend into a long-term bear market. After five years of massive gains, a pullback is probably a pretty normal, healthy occurrence.
That said, to quote the shrewdest of investors, Warren Buffett, investors should be “greedy when others are fearful.” In the event that this is just a correction, that would make the present an ideal opportunity to buy in and get the best price possible.
Push comes to shove, grabbing good stocks when they’ve been beaten down is a strategy that tends to work out in the long run.
Finding the Value Stocks Falling Through the Cracks
It should also be noted before any suggestion to buy recently falling stocks, there’s a real danger to value shopping. The phrase “catch a falling knife” is frequently used to caution against buying stocks just because they’re cheap. The harsh truth is that some stocks are bad at any price, and letting yourself get drawn in by a low one is an easy mistake to make. Or, to quote Mr. Buffett again, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
That said, a correction like the one we’ve just observed is bound to create opportunities. With the entire market headed downward lock-step, it stands to reason that at least some of the stocks losing ground are only doing so as part of the sell-off and not solely because of issues with the company. Which is, of course, not to say that there's no important issues these companies are grappling with. They wouldn't be seeing shares get beaten down if there was absolutely nothing. It's simply to suggest that the risk-off atmosphere is creating a sell-off that's far larger than those issues might warrant.
So, we’re going to take a look at four small-cap companies that are currently oversold based on their technical metrics, while also getting decent to good marks from analyst coverage. Whether they’re a wonderful company or not is up to you, but the fact is, they’ve gotten hit harder than most in recent weeks, and as markets start to bounce back, they should be well-positioned to benefit.

Daktronics ($DAKT)
Daktronics builds a variety of electronic display systems, including scoreboards, for markets in North America. The company’s 2015 has seen the stock decline over 30% with most of that coming in two big chunks following earnings reports in late February and then again this week.
Daktronics is crashing due to a big miss on revenue in its most recent report, and the company continues to struggle to improve margins in a competitive market.
However, despite dark times, there’s reason to believe this stock could be ready to bounce back. Revenue may have missed recently, but it has posted gains steadily for years. Projections for earnings next year are strong, with a PEG of 0.89, Forward P/E of 11.25, and a P/S ratio of 0.60. The technical data also indicates a stock ready to run, with a 14-day RSI of 26.45 and a price that spent most of August beneath its bottom Bollinger Band.
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