You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?
Smart investors like Warren Buffett or Marty Whitman love it when their stocks are suddenly selling at bargain-basement prices. For them, these companies become no-brainer buys.
The investors in the Motley Fool CAPS community also like a bargain, apparently. Below, you'll find three companies whose shares are selling at least 50% below their 52-week highs, but that still earn high honors from our investor-intelligence database. Consider it a BOGO sale on stocks.
|
Stock
|
CAPS Rating
(out of 5)
|
% Off 52-Week High
|
|
K-SEA Transportation Partners (NYSE: KSP )
|
****
|
64%
|
|
WSP Holdings (NYSE: WH )
|
*****
|
61%
|
|
RRI Energy (NYSE: RRI )
|
****
|
51%
|
Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your portfolio.
Take two; they're small
Master limited partnerships are structured to pay out gobs of cash to shareholders in exchange for breaks on corporate taxes. Their high yields are one of the prominent features that attract investors. So when oil barge operator K-SEA Transportation Partners said last October that it was cutting its dividend by 42%, there was little surprise that its shares dropped.
K-SEA operates a fleet of tugs and barges servicing oil producers like ExxonMobil (NYSE: XOM ) and BP (NYSE: BP ) . In general, demand for clean oil products like gas should rise in the summer, while falling temperatures should increase demand for heating oil in the winter. However, the economy foiled those best-laid plans, so demand has been generally weak over the past few years. Worse for K-SEA, more than a quarter of its long-term charters expired in the past ninth months and it couldn't negotiate new leases on almost all of them.
CAPS member Netloss2 admits the market doesn't look good for K-SEA right now, but assuming it hangs on, there could be new demand for its vessels in the near future.
In 2015 Single-Hull vessels are mandated to be retired, this may reduce industry capacity by as much as 20%. Current industry fundamentals are awful. If they get worse there is a chance KSP goes under. Still upside is greater than down IMO
Trading up
Another oil and gas industry company suffering from economic turmoil is WSP Holdings, a Chinese maker of casing, tubing, and drill pipes. Its most recent results show that despite a rebound in oil prices, rising rig counts, and major customers like Sinopec (NYSE: SHI ) that are tied into the Chinese economy, there actually has been less drilling going on all over the world. Revenues fell 68% in WSP Holdings' third quarter, leading to gross profits being down 93%. And complicating the situation was an ongoing trade dispute between China and the U.S., with the Obama administration enacting protectionist trade duties on imported Chinese pipe.
Acknowledging the tight trade confines WSP Holdings faces, CAPS member surreylein nevertheless expects it to recover.
Seems like a well-managed company based on their capacity growth planning and their vertical growth within their niche (i.e. branching out from oil drilling pipes to producing their own steel, growth into inspection of drilling pipes, etc.), and their placement of facilities near to major clients or transportation hubs.
The downsides are the US protectionist tactics via the anti-dumping provisions for exports coming into the US, and the aggressive production capacity growth [WSP Holdings] implemented going into the recession.
Cut the power
The third energy company making the cut this week because of lower demand (do you see a trend here?) is utility operator RRI Energy. Although it was able to narrow its fourth-quarter losses, it says the weak economy suggests there will be limited opportunities to bring new generation capabilities online.
With rising coal prices expected, analysts see the "dark spread" falling. That's the difference between what a utility like RRI Energy or Public Service Enterprise Group (NYSE: PEG ) can charge for a unit of energy and the costs associated with coal.
Regardless, 93% of the nearly 250 CAPS members who have rated the utility believe it will outperform the broad market averages. Add to the discussion at the RRI Energy CAPS page.
Have half a mind
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.
Sign up today for the completely free service and tell us whether these stocks are twice as good at half the price.
RSS Headlines
Fool UK