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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.
You need money, and you need it now!
You've probably seen those irritating loan-settlement commercials on TV that proclaim, "It's your money, get it when you need it." Well, I have a better solution: Permian Basin Royalty Trust (NYSE: PBT ) !
The reason you can get money on a regular basis with Permian Basin has to do with the fact that it pays out a dividend on a monthly basis, giving shareholders instant gratification. However, in recent weeks Permian's results have been anything but gratifying after contending with lowered production, weaker oil prices, and a claim from ConocoPhillips (NYSE: COP ) that it overpaid Permian by $5.9 million.
As for me, I'm calling for calmer heads to prevail. What few production problems are present now do not appear to be long-term disruptors, and the general trend over the long term is that oil prices should head higher as both supply scarcity and demand increases. With its wells under the ownership of one of the most efficient oil exploration and drilling companies in ConocoPhillips, I feel investors have overreacted to what I think will be a temporary drop-off in Permian's monthly dividend.
A more solid state than you think
The economy may be slowly on the mend, but that hasn't been the case for Japan-based Nidec (NYSE: NJ ) , which makes small precision and spindle motors for the electronics and industrials sectors. Last year was particularly tough as the earthquake in Japan and flooding in Thailand hurt many of its suppliers, causing investors to generally avoid the stock. However, now things look to be improving in a big way.
Nidec's first-quarter report released in late July showed modest sales growth of 1.4% year over year that was positively overshadowed by a 13.4% year-over-year growth in operating income. In addition to controlling costs and having better supply visibility from its customers, Nidec's potential to grow right alongside hard-drive makers that are benefiting from a boom in cloud-computing investments gives Nidec the catalyst it needs to head higher. Nidec also has strong tie-ins with the auto industry, and, last I checked, auto unit sales were up 19% year to date. It may not be the prettiest company, but the story behind the stock makes sense.
Offshore, but on track
Tropical Storm Debby did more than just keep meteorologists busy earlier this year; it also whacked TETRA Technologies' (NYSE: TTI ) earnings forecast by as much as 22% on the high end. TETRA, which is an oil and gas services company that has a good chunk of its operations in the Gulf of Mexico, noted an adverse impact of $3 million on its pre-tax earnings in the second quarter. Don't feel bad, TETRA shareholders, BP (NYSE: BP ) and multiple other oil drillers in the Gulf have shut down numerous platforms (in BP's case, seven), so it's quite likely they'll experience a negative impact from the storm as well.
TETRA appears to be a solid value near its lows for a multitude of reasons. To begin with, the weather is highly unpredictable, so I'm willing to completely negate the effect Debby had on its services this quarter. Second, oil rig demand has been rising dramatically with natural gas prices falling -- so much so that oil rig demand has been difficult to keep up with. Finally, the valuation is very compelling at less than eight times forward earnings and given its five-year projected growth rate of 15%.
This week's theme is to look past the short term and toward the big picture. In all three stocks above, there are long-term trends in place that would signify strong growth prospects and little reason to bet against them at these levels.
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 Permian Basin Royalty Trust to My Watchlist.
- Add Nidec to My Watchlist.
- Add TETRA Technologies to My Watchlist.