One of the most successful strategies for investing is to buy companies when they’re trading for less than they’re really worth, and wait until the price rises to the company’s “true value” (it’s often called “value investing”). Value investors often wait until a good company gets hit by an unforeseen disaster, which temporarily decimates the share price, then they scoop up a truckload of stock and wait for the disaster to pass.
It looks very much like Maple Leaf Foods could be in just such a situation, thanks to the terrible outbreak of Listeria that’s been traced back to its processing plant in Toronto. The share price has plunged from a high of $11 to a low of $7.60 (as of this morning) in just a week and a half.
Of course this approach doesn’t always work out: Maple Leaf could be hit by more huge lawsuits, or the crisis could keep getting worse for months, or maybe the company was way overvalued at $11. Plus, some say it’s wrong to profit from a disaster that’s killing people.
What do you think? Would you buy Maple Leaf?