Look For Mispriced Opportunities in Bear Markets

A bear market wreaks havoc on corporate valuations. Increased uncertainty can cut back on potential deals, and cause companies with a variety of disparate divisions to become priced out of expectation with its potential value.

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  • Investors who look for these opportunities and exercise patience can get in on a great company at a good price. It’s a potentially classic case of being able to buy dollar bills for just fifty cents.

    One potential opportunity is in IAC Parts (IAC). The internet and media holding company has taken a 60 percent dive in the past year. Yet revenues are up 64 percent, and managing internet content involves substantially lower expenses compared to a traditional media company.

    That’s likely why analysts are upgrading the stock, even as there’s still market uncertainty.

    Action to take: Investors may want to buy shares around the current price, where the stock is trading at a 15 percent discount to its book value. The company doesn’t pay a dividend, so investors may want to buy a little at a time, and use market weakness over the next few months to gradually pick up more shares.

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  • For traders, the current trend is still down. The December $50 puts, last going for about $2.25, can potentially deliver mid-double-digit gains from here in the coming weeks, especially on a further market drop.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.