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.
Don't sell this cell
It's never fun being the outcast -- especially if you're the one sore spot in an otherwise robustly growing sector. That's the case for Brightpoint (Nasdaq: CELL ) , a contracted wireless services company that repairs broken phones and installs software on them. In its latest quarterly report, Brightpoint warned that it would be losing one of its largest customers beginning in April and was already facing worse seasonal weakness than anticipated. But rather than hanging up on Brightpoint, I think now is the time to answer this call.
Brightpoint noted the loss of this customer, which it declined to name, will reduce its full-year EPS projections by $0.02 to $0.06. That's pretty nominal when you consider that the stock has lost more than 30% of its value in just the past two months. Based on mobiThinking's February 2012 report, there are 6 billion mobile subscriptions worldwide, which leaves Brightpoint with a huge potential list of customers. The broken merger between AT&T (NYSE: T ) and T-Mobile also secured the company's logistics division from losing any more revenue. At just seven times forward earnings, I would consider the company a bargain at these levels.
One more call to take
You know I love a great value, but this one comes with a bit more risk than your traditional single-digit forward P/E stock. The company in question is yet another foreign telecom provider, Telecom Argentina (NYSE: TEO ) .
Investing in Argentina comes with risks that you simply don't see in many other markets. Unstable politics, rebel movements, and corruption are definite possibilities that could interfere with your investment in Argentina. If you can look past the risk factor, Telecom Argentina, the country's largest telephone and network services provider, offers an incredible value. The company has grown revenue in each of the past 10 years, with gross margin rising significantly since Argentina's near-economic collapse in 2002. The company also pays out a healthy dividend -- but keep in mind that's at its own discretion and is in no case guaranteed. If you can stomach the risk factor, Telecom Argentina has the rare potential to offer amazing growth and a very high yield.
Put this lump in my stocking, pretty please!
Pessimism in the coal sector is getting out of control. If you recall, last week I made my case as to why I would soon be purchasing one of my longtime watchlist companies, "10 Mid Caps to Rule Them All" pick Arch Coal (NYSE: ACI ) . Arch offers one of the best dividends in the sector and seems like a genuine bargain, trading well below book value. This week, I want to highlight my other favorite coal play, which offers one of my favorite CEOs and what I consider to be the greatest dividend around: Alliance Resource Partners (Nasdaq: ARLP ) .
Through thick and thin, Alliance Resource has grown its business. Based on its full-year results released in January, the company has reported record net income for 11 years in a row. More impressive to me is the fact that it's increased its dividend for 15 straight quarters! (Note that I said quarters, not years.) This company's monster yield is now approaching 7% as coal sentiment continues to fall. Long story short, I'm starting to drool over here, so someone might be wise to get me a bib.
We're once again mixing things up this week by looking at companies in currently unloved sectors. Thinking outside the box is usually where the best deals can be had. I'm so confident these three names will bounce off their lows that I'm going to make a CAPScall of outperform on each one.
In the meantime, consider adding these potential winners to your free and personalized watchlist and get your own personal copy of our special report, "The Motley Fool's Top Stock for 2012," to see which company our chief investment officer has dubbed the "Costco of Latin America." Best of all, this report is completely free, so don't miss out!
- Add Brightpoint to My Watchlist.
- Add Telecom Argentina to My Watchlist.
- Add Alliance Resource Partners to My Watchlist.