Great Prices, Great Companies

What, then, had pounded these two stocks down? Between July and July 23, 2002, as WorldCom keeled over into bankruptcy, the Dow Jones Industrial Average fell from 9096.09 to 7702.34, a 15.3% plunge. The good news at Ball and Stryker got lost in the bad headlines and falling markets, which took these two stocks down with them.

Although Ball ended up priced far more cheaply than Stryker, the lesson here is not that Ball was a steal and Stryker was a wild pitch.

Instead, the intelligent investor should recognize that market panics can create great prices for good companies (like Ball) and good prices for great companies (like Stryker). Ball finished 2002 at $51. a share, up 53% from its July low; Stryker ended the year at $67.12, up 47%. Every once in a while, value and growth stocks alike go on sale. Which choice you prefer depends largely on your own personality, but bargains can be had on either side of the plate.

PAIR 7: NORTEL AND NORTEK The 1999 annual report for Nortel Networks, the fiber optic equipment company, boasted that it was “a golden year financially.” As of February 2000, at a market value of more than $150 billion, Nortel’s stock traded at 87 times the earnings that Wall Street’s analysts estimated the company would produce in 2000.