The world's top value investors love it when their best stocks ideas are selling at bargain-basement prices. For those investors, companies offering fire-sale prices become no-brainer buys.
So regular investors like you and me would do well to emulate the masters and look at companies offering a "buy one-get one" sale on their stocks. We'll pair the companies selling at least 50% below their 52-week highs with the insights of the top investors in the Motley Fool CAPS community. When top earthbound investors also like a company's prospects, it may be wise for us to take notice too.
CAPS Rating (out of 5)
|McDermott (NYSE: MDR )||*****||50%|
|Zalicus (Nasdaq: ZLCS )||****||62%|
Source: Motley Fool CAPS.
Naturally, you'll want to do more due diligence before buying. Low-priced appliances in the dent-and-ding section of your home-remodeling superstore might be there for more reasons than just a few scratches on the surface: Real trouble might be lurking below. Same thing here, so make sure there's nothing seriously wrong with the company before you plug it into your portfolio.
Standard of excellence
As the sweet spot of drilling moves further from the coastlines, drillers like Transocean successfully ply the ultra-deepwater waves while shallow water specialists like Hercules Offshore find it difficult to difficult to keep their head above water.
Following the drillers out to sea has been engineering and construction firm McDermott, which has been a shallow-water specialist for years, but is finding its excursions in the Atlantic deeps more challenging than expected. It earned just $0.04 a share last quarter as expenses weighed it down, coming in well below analyst expectations and the year-ago quarter's $0.19 a share. While revenues grew a smart 51% year over year, it, too, came in below what Wall Street anticipated.
Fortunately, it has a healthy balance sheet and more than $3.9 billion worth of backlog to work on, even if it's down from the $5 billion it recorded last year. Although its spinoff of Babcock & Wilcox makes it more specialized, thus retaining greater risk in a volatile sector, trading at just 10 times future earnings values it at a discount to Jacobs Engineering, Fluor (NYSE: FLR ) , and Shaw Group (NYSE: SHAW ) , and putting it on part with Foster Wheeler.
CAPS member Wisdomled believes the financially sound company will bounce back and sail the seas again, which seems right in line with the All-Stars rating the firm, 99% of whom say it will outperform the broad market indexes. With oil north of $100 a barrel, Mideast tensions rising, and no apparent slaking of our thirst for oil, I'd say the long-term outlook is good too, so I've rated McDermott to outperform as well.
There's no sugarcoating the risks facing Zalicus to make them any less painful. It has but one product on the market in Exalgo, which it's partnered with Covidien (NYSE: COV ) , but that partner also buried the hatchet with generic-drug maker Watson Pharmaceuticals, so generic versions of the pain medication will come onto the market sooner.
Zalicus has been raising cash hand over fist lately, so shareholders have been feeling the pressure from its selling shares into the market. But with $50 million in cash on the books at the end of the year, the drugmaker has sufficient money on hand to finance its development program and it has a bevy of products in the pipeline, any of which could provide a boost to the stock price.
Early-stage results are due in the second quarter on Z944, an inflammatory-pain treatment, and mid- and late-stage trials will begin on a number of therapies in the second half of this year and continuing into 2013.
While Watson can introduce its generic seven months early, that won't happen until late in 2013, so there's still time for Zalicus to get its other therapies moving forward. More importantly, though, Covidien did not include a 32 mg dose of the pain treatment in its generic negotiations and has previously said this higher dose is key to its achieving peak sales of $200 million annually. Analysts expect that regimen to hit the market later this year, which could be why Covidien was willing to settle with Watson on the lower dosages. For its part, Zalicus anticipates having exclusivity on the 32 mg version through July 2014, continuing the lucrative partnership it forged.
CAPS member k2merlinsix likes Zalicus's chances, considering the robust drug pipeline it has, and rates it to outperform the indexes. I agree, and when adding the discount being applied to the stock as the market ignores the contribution the 32 mg dosage will make, I've gone and rated the stock to outperform as well.
Let us know on the Zalicus CAPS page or the comments section below whether you think it will manage investor pain going forward, and add the drugmaker to the Fool's free portfolio tracker to be notified when its clinical trial results come in.
Have half a mind
Sign up today for the completely free CAPS service, and tell us whether these stocks are twice as good at half the price. It's not just drug makers though that are setting the world on fire, either. Fool analysts think they've found a different kind of health-care company with plenty of upside. You can read about it in their new free report, "Discover the Next Rule-Breaking Multibagger." Get your copy for free.