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 when the market reacts to the upside.
Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.
Failing the bar exam
The silver bullet may be delivering refreshment for those in the South already experiencing summer-like temperatures, but it's been delivering heartache for its shareholders.
Shares of Molson Coors (NYSE: TAP ) dipped last week on news that it would purchase StarBev for $3.5 billion in order to get its nose wet in international markets. StarBev will give Molson Coors immediate access to beer consumers in Hungary, Romania, and Bulgaria, and should help the company weather a steady decline in lager sales domestically.
You'd think that with Coors Light unseating Anheuser-Busch InBev's (NYSE: BUD ) Bud Light for the No. 2 best-selling beer in the U.S., the company would be performing better, but that just hasn't been the case. Health-conscious consumers, high unemployment rates coupled with tight budgets, and the emergence of smaller craft brewers have put a dent in Molson's bottom line. I feel that with Molson's international push into non-saturated areas, the company represents an intriguing value at 10 times forward earnings, while also yielding 3%.
It's always darkest before the dawn
Have I mentioned that I think the overwhelmingly negative sentiment in the coal sector represents a buying opportunity? OK, maybe just a few times, but I haven't yet added Cloud Peak Energy (NYSE: CLD ) to my buy list until now!
Like every other coal company out there, a mixture of decade-low natural gas prices and a slowdown in China's growth are crimping demand. Cheap natural gas prices are encouraging electric utilities to switch from coal to natural gas for electricity-generating purposes. But switching gears is very capital-intensive, and there's still not a huge incentive for many utilities to make the move. What should be understood is that coal still accounts for a significant portion of energy generation in the U.S. and will continue to do so for years to come.
Cloud makes a great value here, at just three times cash flow and seven times forward earnings. Cloud may not offer the same diversity in mines as CONSOL Energy (NYSE: CNX ) , which has the freedom to close mines and adjust its operations schedule as needed to meet demand. But it's considerably cheaper on a book and forward P/E basis than the bigger CONSOL. When others are fearful, be greedy!
Hecla's Lucky Friday mine was ordered closed in January by the Mine Safety and Health Administration, and the company cautioned that it could take more than a year to clean the mine to get it back into spec. Since then, the stock has been battered to a pulp and now, right around book value, it makes a sensible investment.
For starters, Hecla has a delectable net cash position of $256 million, which should allow it to weather this setback easily. Hecla is also sitting on proven and probable reserves of 147.7 million ounces of silver and 742,000 ounces of gold. Its mineralized and inferred resources could yield an additional 280 million ounces of silver. In short, Hecla is sitting on many years' worth of profits. I feel this stock could be off to the races long before it ramps up production at Lucky Friday in 2013.
With four straight days of selling under our belt, it's always good to remember the Oracle of Omaha's famous words, "Be fearful when others are greedy, and be greedy when others are fearful." Shareholders in the above stocks are fleeing en masse despite attractive valuations on all three. I'm so confident that these three names will bounce off their lows that I'm going to make a CAPScall of outperform on each one.
- Add Molson Coors to My Watchlist.
- Add Cloud Peak Energy to My Watchlist.
- Add Hecla Mining to My Watchlist.
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!