3 Stocks Near 52-Week Lows Worth Buying

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.

Pipeline of profits
I don't often suggest trying to catch a falling knife or buying into an unproven company, as my Foolish colleague Travis Hoium summarized it, but if your fingers are quick enough and your risk tolerance is moderately high, then I feel you could snag Southcross Energy Partners (NYSE: SXE  ) for an attractive price after Thursday's beat-down.

There was no question about Southcross' fourth-quarter results; they were ugly! This master limited partnership involved in transporting, processing, and storing primarily natural gas and natural gas liquids reported a loss per unit of $0.17 on $151.7 million in revenue when a profit of $0.10 per unit and $160.2 million in revenue was expected. Southcross blamed weak natural gas liquid pricing, stagnant natural gas demand, and a myriad of unexpected costs that totaled $8.6 million for the uninspiring results.

However, Southcross remains on track to expand its processing capabilities and has put cost control strategies in place in order to see demonstrable results as quickly as May. Its 2013 capital expenditures, for instance, are now expected to be just $40 million to $50 million, down from prior guidance of $100 million to $125 million.

From an income perspective is where Southcross really gets attractive. Most flyby midstream investors wouldn't give the company the time of day because most websites have extrapolated its yield at less than 4%. But Southcross' $0.24 payout was prorated based on its IPO, which occurred in November. Southcross' actual quarterly distribution should be $0.40 or greater, placing its current yield at a very attractive 7.9%. Considering that big investments are being made in midstream infrastructure, I'm willing to give Southcross a one-quarter pass on its earnings flub and feel it'll deliver for investors over the long run.

Built to last
Last week I took a gamble by suggesting people look into domestic U.S. Steel producer AK Steel. This week, I'm going to once again stick with the steel sector and suggest you look overseas to Companhia Siderurgica Nacional (NYSE: SID  ) , or CSN.

A lot of the same factors that prevailed in my assessment of why AK Steel could outperform in the future are applicable to CSN, which is a Brazilian steel products producer for the automotive and home markets. A World Trade Organization ruling last year should open up China's market to increase overseas steel competition, which could play right into the hands of CSN and AK Steel. Furthermore, CSN has plenty of opportunity for growth at home in Brazil, where it generates more than 60% of its sales and where car sales hit an annual record in 2012 at 3.8 million units. With Brazil able to expand even as growth concerns exist in the U.S. and Europe, it gives CSN an advantage over many of the U.S.-based steel producers -- even AK Steel.

The company's 2012 loss is also very deceptive, as the underlying fundamentals of its business are improving. CSN saw a double-digit increase in fourth-quarter revenue as iron-ore prices continue to rebound, and EBITDA increased 14% from the year-ago quarter. It was actually a valuation writedown of shares it owns in rival Usiminas that dragged CSN's full-year results to a loss. This is a one-time write-off and it's not expected to have a lasting impact on CSN's outlook moving forward.

If you're looking for a "steel of a deal," CSN just might be it.

Overflowing with data
At times I can be very critical of the cloud-computing revolution because the valuations of cloud-based companies are often years ahead of their time. For data warehouse company Teradata (NYSE: TDC  ) , which helps analyze and store data for multiple industries, everything appears ripe for a rebound.

Pessimism has been the name of the game in recent months as Teradata's fourth-quarter report shed light on the fact that Asia-Pacific and U.S. growth is slowing. Europe, Africa, and the Middle East delivered 21% growth in the fourth quarter, but that region only accounts for 24% of total revenue. All told, Teradata guided toward sales growth of 6% to 10% in 2013, which was below what Wall Street was expecting.

Still, there are plenty of positive takeaways even following these results. For one, Teradata is in far better shape than its peer Oracle (NYSE: ORCL  ) , which missed revenue estimates by 4% and saw online and cloud-based software subscriptions (which would include data warehousing) drop by 2% during its latest quarter. It's not often a company can claim dominance of Oracle, but Teradata is in much better shape at the moment.

From a financial perspective, Teradata is also attractive with a net cash position of $455 million and a forward P/E of 17. With sales growth expectations ranging from 8% to 11% over the next two years, there seems to be ample room for bottom-line growth, and perhaps the introduction of a dividend. All told, I don't feel much of the pessimism surrounding Teradata is warranted.

Foolish roundup
This week was all about forgiving and forgetting. We know all three companies punted their most recent quarterly reports, but the future of the Brazilian steel industry, global data warehousing, and domestic gas transport and processing infrastructure looks strong.

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.

The amount of data we store every year is growing by a mind-boggling 60% annually! To make sense of this trend and pick out a winner, The Motley Fool has compiled a new report called "The Only Stock You Need to Profit From the NEW Technology Revolution." The report highlights a company that has gained 300% since first recommended by Fool analysts but still has plenty of room left to run. To get instant access to the name of this company transforming the IT industry, click here -- it's free.


Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 04, 2013, at 11:13 AM, ejlanders14 wrote:

    Hi Sean - any concern over receivables increasing almost 3 fold from Sep 2011 to Sep 2012, according to the MF balance sheet for TDC?

  • Report this Comment On April 05, 2013, at 7:59 PM, shahmms wrote:

    Any concern about litigation pending against company for housing its workers on contaminated land?

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2341485, ~/Articles/ArticleHandler.aspx, 10/25/2014 4:43:15 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 19 hours ago Sponsored by:
DOW 16,805.41 127.51 0.76%
S&P 500 1,964.58 13.76 0.71%
NASD 4,483.72 30.92 0.69%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2014 4:05 PM
SID $3.61 Up +0.21 +6.18%
Companhia Siderurg… CAPS Rating: ***
SXE $20.35 Up +0.47 +2.36%
Southcross Energy… CAPS Rating: No stars
TDC $40.69 Up +0.82 +2.06%
Teradata CAPS Rating: ****
ORCL $38.73 Up +0.50 +1.31%
Oracle CAPS Rating: ****

Advertisement