Just as we examine companies each week that may be rising past their fair value, we can also find companies potentially trading at bargain prices. While many investors would rather have nothing to do with companies tipping the scales at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to the downside, just as we often do to the upside.
Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.
Pedal to the metal
I almost have to choke down this recommendation a bit because it's a company that I would normally avoid, but Alcoa
Even with reduced profit forecasts, investors looking for metals exposure have to be intrigued by Alcoa at 65% of book value and just 7 times forward earnings. Also consider that Alcoa's gross margin is much higher than that of its closest rival, Aluminum Corporation of China
If you asked shareholders of engineering and construction management company Fluor
Since its highs earlier in the year, Fluor has fallen from a forward P/E of nearly 24 to just 13. The company is now trading at a price-to-cash-flow ratio near its lowest levels since 2001! With speculation swirling that the U.S. government will once again need to spur the economy through a potential jobs package, companies like Fluor shouldn't be counted out. Don't forget that Fluor also gives you a 1.1% yield while you wait for investors to come to their senses.
1.21 jiggawatts? It can be done!
I could just as easily include a new solar stock each week in this column -- and today I'm going to do just that with SunPower
As Travis expounded further, SunPower's cost-per-watt might be one of the highest in the industry, but this also leaves room for a large amount of improvement. It's not as if SunPower has been struggling, either, despite its high cost-per-watt. The company is currently valued at just six times forward earnings and half of its book value, consistent with other solar companies I've highlighted in recent weeks, JA Solar
Market panic is on the rise and there are deals to be had. Keep your eyes peeled for companies trading at or below book value that have stronger earnings potential than their peers and you should be in good shape when the market finally does find its footing.
What's your take -- do these fallen angels deserve a second chance? Share your thoughts in the comments section below and consider adding Alcoa, Fluor, and SunPower to your free and personalized watchlist to keep up on the latest news affecting each company.