Just as we examine companies each week that may be rising past their fair value, we can also find companies potentially trading at a bargain price. 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.
Shareholders took poorly last week's announcement from Comverse Technologies
It really wasn't a secret that Comverse had been looking for ways to unlock shareholder value, but many investors thought it would put its entire company on the auction block. Even though it appears Comverse didn't get any adequate takeover bids, it's still going to unlock shareholder equity by spinning off Comverse, its software applications and subscriber management division.
Comverse Technology, which is actually a holding company comprised of Comverse and majority-owned subsidiaries Starhome and Verint Systems
Some sectors of the market are simply no-brainer long-term buys, and as I see it, health care is one such sector. As the world's population ages, the need for medical technologies and supplies is going to go up as well. Any medical technologies company currently turning a profit with products that are unlikely to be phased out any time soon could be a great long-term buy. That's why this week I'm adding CareFusion
CareFusion shareholders went running for the hills last Monday when the company cautioned investors that it would not meet its own previous revenue guidance. The company cited disappointing sales of its ChloraPrep antiseptic and various infusion products as the reason for the shortfall. Still, CareFusion stuck to its sales forecast and with last week's dip is now trading at only 11 times forward earnings. Keep in mind this is a company that boosted its gross margin from 44% in 2009 to more than 51% in fiscal 2011. Those are the type of figures I can get behind!
Vive la France
Whether you like a good French joke or not, you have to like France Telecom
The reason I'm not too concerned has to do with the way the major telecoms in the U.S. beat around Vonage
Therefore, we're left with France Telecom, a company valued at just seven times forward earnings, 1.1 times book and 2.4 times cash flow. All of these figures represent lows not seen since 2002 or even earlier. France Telecom is profitable and stable, and pays out a handsome 9% yield at the moment. Set it and forget it; this one's a long-term winner.
This week we we're reminded that it's not always about the quick trade. These three companies have solidly profitable businesses and sound long-term strategies. I'm so confident they'll succeed that I plan to make a CAPScall of outperform on each one. The question now: Would you do the same?
In the meantime, consider adding these potential winners to your free and personalized watchlist and get your own personal copy of our latest special report, "The Motley Fool's Top Stock for 2012," and see what our chief investment officer has dubbed the "Costco of Latin America." Best of all, this report is completely free, so don't miss out!