Stock buying opportunities come in many different forms. For example,
– a company is expanding into a new region or even new business
– an acquisition or sale of a business changes the company outlook
– a cost-cutting program improves earnings
There is one other way which could possibly give the biggest discount of all- short-term trouble.
You can tell from this quote that Warren Buffett, the billionaire super-investor, loves this scenario in particular:
The best thing that happens to us is when a great company gets into temporary trouble . . . We want to buy them when they're on the operating table.
He followed it when investing in American Express, Saloman Brothers and Bank of America. All three were in short-term yet reversible trouble and Buffett's company Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) made millions.
Are there any ASX stocks that fit this scenario? There is actually.
Woodside Petroleum Limited (ASX: WPL) is feeling the hurt like its energy industry peers from the total collapse in world oil prices.
Quality company?
Yes. The energy giant is financially sound with billions of dollars ready for acquisitions and investments just as industry consolidation may take place soon.
Though not on the "operating table", it is down about 13% over the past six months as oil nosedived more than 50%. Oil may not have hit a bottom just yet, but US$40 a barrel should be a major test. Brent crude oil is currently at US$47 a barrel.
Time to buy?
Not yet… and here's why. This temporary trouble is brought on by oversupply of oil, which may not dry up for another year or so. US oil production will still rise and OPEC nations are not clamping down on exports to burn off excess supply.
Foolish investors who follow energy stocks should still hold off. Oil prices could drag along the bottom for a while, like iron ore prices. Market fear could even drive oil prices down to further extremes, making even better opportunities.
Juicy yield
For current shareholders or investors who want to start a small position, the sell-off is jacking up Woodside's yield to a fat, juicy 6.6% fully franked. That's better than bank term deposit rates and even the yields of all of the big four banks. That makes Woodside very attractive as a blue-chip dividend stock.
