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.

Don't forget the cash flow
With austerity measures hitting home in Europe, it's fairly easy to understand why Telecom Italia (NYSE: TI  ) (NYSE: TI-A  ) , Italy's largest telephone service provider, has struggled mightily. Unlike in the U.S., where a landline or cell phone are viewed as practical necessities, consumers in Italy have had no problem giving up their landlines, or businesses postponing their network expansion, until Italy's economy improves. In fact, in Telecom Italia's first-quarter report, we saw EBITDA decline 10%, to $3.5 billion, and overall sales dip 8%.

Despite the negativity, I'm going to point investors to the same factor that made me think so highly of France Telecom last year: Telecom Italia's cash flow.

While I certainly don't expect Telecom Italia's landline business to spring a miraculous rebound, the company can thwart unnecessary spending in order to maximize its cash flow, and calm nervous investors. Despite the deepest recession Europe has seen in more than a generation, Telecom Italia has generated an average of $3 billion in positive free cash flow over the previous four years. That cash easily buoys the company's current 3% yield, and goes a long way to calming skittish investors who worry about its $42 billion in net debt.

Another factor that can't be overlooked is Telecom Italia's plan to spin-off its fixed-line network. The deal, which would allow it to spin-off its fiber and copper assets into a company worth about $18 billion, would help generate cash, and would certainly make it easier for prospective investors to understand how the company makes money.

At less than five times cash flow, Telecom Italia is a name I strongly suggest you dig more deeply into.

What the Teck?
If you invest in commodity-based companies or miners, you've probably uttered the phrase "What the heck?" a few times over the past year. I know I have! However, I feel there are plenty of reasons to believe that Teck Resources (NYSE: TCK  ) , a miner of everything from copper and zinc to coal and silver, will turn things around.

Not to sound like a broken record, but have investors given absolutely no consideration to Teck's cash flow? Teck did see commodity prices shrink almost across the board in the first quarter, but it was still able to generate $776 million in positive free cash flow. Like Telecom Italia, this cash flow helps Teck pay out what amounts to a 3.8% yield, and also allows the company to finance some of its exploratory projects with operating cash rather than taking on any additional debt. Not to mention that Teck has averaged $1.95 billion in free cash over just the past four years.

There's also strength to be had in Teck's diversity. Given that it produces metals known for their volatility, like silver, as well as more stable metals like copper, Teck offers a little something for every level of metal and mineral investor. I also happen to be an optimist when it comes to the coal sector, because overseas markets like China and India should soon step in and help buoy demand and pricing. With a diverse product portfolio, Teck should be able to weather any economic storm.

At a minuscule nine times forward earnings, and valued at just 73% of book value, I see no reason why Teck shouldn't be on your radar.

A smart investment
Short-sellers have been out in full force this month in Kimco Realty (NYSE: KIM  ) , a real estate investment trust that has owned interests in 895 shopping centers across North, Central, and South America. The selling has been particularly noticeable ever since Kimco announced it was purchasing a partner's stake in 70 shopping centers via two portfolios -- the Kimco Income Fund I and Kimco Income REIT joint venture – for $67 million. Investors may not be thrilled with this purchase, but I'm certainly not doing any complaining.

The 70 shopping centers that Kimco acquired currently boast a 96% occupancy rate, and are home to some of the biggest and healthiest retailers in the U.S., including Wal-Mart and Home Depot. The best aspect of having a company like Wal-Mart as a renter is that it has more than sufficient cash flow to deal with inflation-pacing rent hikes, and its business is non-cyclical, thanks to its wide variety of products carried. This means a portfolio full of investment-grade renters for Kimco.

I believe we're also seeing overblown fears that a rise in interest rates could harm the want for REIT's like Kimco, which pay out a minimum of 90% of their overall income as a dividend. Kimco's 3.8% yield certainly isn't as high as you'll find from other REIT stocks (think mortgage-REIT's for instance), but it's still nearly double what you'd make investing in a 10-year U.S. Treasury bond.

Kimco's portfolio is sporting high occupancy rates which give it plenty of rental pricing power, and its yield of 3.8% appears safer by the day. This is a REIT that should be heading higher.

Foolish roundup
This week, it's all about going back to basics. The thing that matters most for telecom service providers and mineral miners is cash flow, and Telecom Italia and Teck Resources have more than ample cash flow to maintain their dividends and support higher valuations. For Kimco, it's all about occupancy rates and the quality of its occupants, which doesn't appear to be a problem.

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.

If you're on the lookout for high-yielding stocks, The Motley Fool has compiled a special free report outlining our nine top dependable dividend-paying stocks. It's called, "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here.


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