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.
Electric utilities are rarely big movers, but the entire sector has been slammed in recent months by weakening economic growth, rising natural gas prices, and the effects of Hurricane Sandy, which required countless utility and transmission providers to repair their power grids. One of the utilities that's felt this pain is New Orleans-based Entergy (NYSE: ETR ) . Yet, the way I see it, now could be the perfect time to dip your toes into what I feel is a long-term winner.
Entergy is the second largest nuclear energy producer with in the United States behind only Exelon (NYSE: EXC ) , and it's suffered from the same issues that Exelon has: mainly the higher costs associated with nuclear energy relative to alternative energy, coal, and natural gas. I'm optimistic, however, on nuclear's future as it's a clean energy source that will help make the United States more energy independent.
In addition, Entergy's move to divest its electric transmission business to ITC Holdings (NYSE: ITC ) will help add to Entergy's cash balance, give the company more credit flexibility, and allow it to focus on upgrades to existing facilities and alternative energy projects. Now yielding better than 5% and valued at just 12 times forward earnings, Entergy might be the perfect selection to the income-seeking long-term investor.
Going to the money machine
Saying that a stock is a money machine would be a little cliché -- unless the stock in question is Cardtronics (Nasdaq: CATM ) , the world's biggest ATM provider.
Cardtronics shares were "shredded" in the words of my colleague Jeremy Bowman in early November after the ATM provider reported robust revenue growth of 21% and a 10% boost in EPS, with organic and acquisition growth both contributing to bottom-line gains. What threw Wall Street for a loop was Cardtronics' full-year EPS guidance of $1.58-$1.61, which was down slightly from the $1.58-$1.64 it had previously projected.
Like Jeremy, I agree that these results create what looks like a full-fledged buying opportunity in this ATM provider. The key point of Cardtronics' earnings results was its 10% organic growth, which demonstrates the company's ability to grow its business without the aid of acquisitions. However, another point worth mentioning is that we haven't even begun to see the tip of the iceberg in terms of synergies from its recent acquisitions. I feel traders are making a foolish mistake by selling here over just a few cents in EPS when the long-term outlook still looks so vibrant.
Results you can count on
Transaction management, cloud enablement, and connectivity services provider Synchronoss Technologies (Nasdaq: SNCR ) hasn't had the best go of things in recent quarters as IT spending from AT&T (NYSE: T ) and Verizon Wireless has slowed. That shouldn't, however, stop you from getting in near the ground floor of what looks like a solid long-term cloud and connectivity play.
To begin with, AT&T makes up a major chunk of Synchronoss' revenue, and AT&T recently announced a $14 billion IT spending plan to upgrade its wireless infrastructure. We've been waiting for telecom companies to step up to the plate and announce aggressive spending plans, and this looks like a first step in the right direction.
Also important for Synchronoss is the huge amount of money being funneled toward cloud-computing companies. As a content migration software provider for AT&T and Verizon Wireless, Synchronoss is in the sweet spot to receive big bucks from these companies over the coming years as they move their content increasing toward large data centers. With $109 million in net cash and valued at just 14 times forward earnings, Synchronoss looks like a mighty fine value, here.
This week's prevailing theme is "Was that really an earnings warning?" In all three stocks, we've seen shareholders in an uproar over earnings shortfalls that barely missed estimates despite solid long-term growth prospects.
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.
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