3 Stocks Near 52-Week Lows Worth Buying

Do these fallen angels deserve a second chance? You be the judge!

Feb 18, 2014 at 5:05PM

Just as we examine companies each week that may be rising past their fair value, we can also find companies trading at what may be bargain prices. While many investors would rather have nothing to do with companies wallowing at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to a company's bad news, just as we often do when the market reacts to good news.

Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.

A basic-necessity cash flow machine
There are few truly basic necessities to life, but our water is one of them. Water is incredibly inexpensive given how important it is to our everyday lives, and we often overlook its importance when it comes to investing our hard-earned money. A company here that I'd suggest digging more deeply into would be Aqua America (NYSE:WTR), one of the largest water utility companies in the U.S., which services close to 3 million people on the East Coast and Ohio River Valley.

Like most water utilities, growth occurs in two primary ways: either through acquisitions or via rate increases coupled with tight cost controls. For Aqua America shareholders, they're receiving a healthy handful of both!

Through the early part of December, Aqua America had brought 15 new water and wastewater facilities into its fold through acquisitions -- and that's in 2013 alone. These new customers provide the expansive growth that shareholders look for in the top-line, while rate increases in New Jersey, Texas, Illinois, Ohio, and Virginia announced in the third-quarter add the pricing power and profits that drive EPS higher.

Another notable factor that's driven higher by rate increase is Aqua America's dividend. Currently sitting at a yield of 2.5%, this dividend is well-protected by the fact that even in times where the weather works against Aqua America, the company can still deliver healthy profits. Referencing its third-quarter results yet again, the company actually reported a 5% year-over-year decline in revenue as rainfall in its serviced regions increased, lowering the demand for water for outdoor purposes. But because of tight expense controls (total expenses rose just 1%) and rate increases, its net income rose by 26%!

Water utilities like Aqua America certainly aren't going to knock your socks off with their growth potential, but they're a good way to collect dividend income and sleep well at night.

Drilling deep for value
Another week, another offshore driller that is just dirt cheap by all standards of the word. This week I'm highlighting Atwood Oceanics (NYSE:ATW), an operator of 13 current mobile offshore drilling units.

On paper, offshore drillers look like a genius long-term play. The demand for oil and natural gas extraction is only going to increase as emerging market economies like China and India industrialize, and as major world powers like the U.S. try to reduce their reliance on foreign energy sources. Much of the world's deepwater and ultra-deepwater oil assets are still waiting to be discovered or recovered, leaving specialty mobile drillers like Atwood Oceanics in a prime position to benefit.

The other factor that works in Atwood's favor is simply that there isn't a lot of competition in the field. Because a number of its peers' contracts and backlog can be spoken for years in advance, there's rarely a lack of opportunities for Atwood to lock in. Currently, Atwood's rigs are located around the globe -- off the coast of Asia, Australia, and Africa, and in the Gulf of Mexico.

The company's latest results, reported two weeks ago, do point to some modest softness in its top-line growth, which is consistent with what we've been hearing from other offshore drillers over the past couple of weeks. Transocean (NYSE:RIG), for example, cautioned in recent months that it's still looking for work for about a third of its fleet for 2014. However, Atwood's charter dayrates remain among the best in the industry, and as Foolish energy analysts Taylor Muckerman and Joel South noted shortly after Atwood reported, its jackup rig growth remains phenomenal.

Over the short-term, there could be some ongoing top-line weakness as new rigs hitting the market all simultaneously look for work, but over the long run I believe there are still more than enough underground assets and too few rigs to meet exploration and production companies' demands. At less than seven times forward earnings I'm very interested in Atwood!

Pedal to the metal
It certainly won't get hearts pumping like the muscle cars that Detroit's big three are currently churning out, but Honda Motor (NYSE:HMC) has dipped to a point where it could be time to shift out of neutral, put this stock in drive, and press the pedal to the metal.

A number of factors have been working against Honda in recent years, both domestically and in China. In the U.S., tougher competition from the likes of Ford (NYSE:F) -- which has certainly caught up to Honda in terms of fuel economy with its EcoBoost engine -- has stymied auto sale growth, while anti-Japanese sentiment in China caused Honda's sales to falter through the first-half of 2013. Things, though, could be at an inflection point.

In December, Honda was able to grow its unit sales in China by 60%, which followed a doubling in year-over-year unit sales in November and a 211% gain in October. It's true these figures were up against extraordinary circumstances, but they point to Honda's growing acceptance in the world's fastest-growing auto market.

In the U.S., Honda joined Detroit's finest in the negative column for January's weather-weakened auto sales, but its sales volume only slipped 2% versus the 7% industry average. In fact, the Honda CR-V actually delivered a 2.4% sales increase during the month! Honda also introduced a redesigned Accord this year in all-electric and gasoline-electric hybrid models, and unveiled the redesigned Fit for 2015, which it anticipates could help it regain U.S. market share.

At a mere nine times forward earnings and 91% of book value, Honda is being priced as if its future growth were moot at best. While I'd certainly call the company far from revolutionary lately, its dependability and economy pricing make it a staple in the U.S. and China. I would strongly suggest you take a deeper dive into Honda at these levels.

The No. 1 Way to Lose Your Wealth Without Even Knowing It
You’ve fought hard to build wealth for you and your family. Yet one all-too-common pitfall could completely derail your dreams before you even know it. That's why a company The Economist hails as "an ethical oasis" has isolated five simple questions you must answer to ensure that your financial future is really secure.

Can you answer YES to all five of these eye-opening questions?
Click here to find out -- before it’s too late!

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends Atwood Oceanics and Ford. It also owns shares of Transocean, and recommends Aqua America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers