3 Stocks Near 52-Week Lows Worth Buying

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

Jun 24, 2014 at 1:45PM

Just as we examine companies each week that may be rising past their fair values, we can also find companies trading at what may be bargain prices. While many investors would rather have nothing to do with stocks 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.

"Buy it now"
I admit that I had to do a double take, but that is indeed e-commerce and mobile-payment giant eBay (NASDAQ:EBAY) trading close to a 52-week low.

Source: Ryan Fanshaw, Flickr.

EBay's weakness can be explained by three points. First, it reported a massive $3 billion tax charge in the first quarter, which resulted in the company losing $1.82 per share on a GAAP basis. Although analysts and investors typically ignore one-time costs like a tax charge, sweeping $3 billion under the rug is asking a bit much, even for eBay. Secondly, retail weakness is carrying over to eBay and causing concern that consumer spending could be nearing a plateau. That would be bad news for both its online marketplace and its mobile-payments business. Finally, a recent massive data breach temporarily reduced confidence in eBay's ability to secure and protect its customers' data.

But I'd opine that eBay is firing on all cylinders, tax charge aside, and I'd consider the company an especially intriguing value at its current levels.

Aside from its tax loss, eBay also reported a 12% increase in marketplace sales to $2.2 billion and a 19% surge PayPal revenue to $1.85 billion. With the exception of Amazon there's just no e-commerce platform with the success or branding power of eBay. That alone should sustain high single-digit growth of its marketplace platform through the remainder of the decade.

The real growth opportunity for eBay is its mobile-payment business PayPal. The truth is that most businesses are still working out how to properly incorporate mobile payments into their platform, so we're just witnessing the tip of the iceberg in terms of PayPal's revenue potential. In short, I wouldn't be surprised if PayPal were generating $5 billion in sales per quarter by 2020 for eBay.

The ability to shop at home and pay with the click of a button or a wave of your smart device means fewer hassles for consumers and a generally loyal customer base. Given eBay's forward P/E of just 14 and a five-year growth rate of 14%, I'd suggest that investors are greatly undervaluing eBay's potential.

Submeridian results
There's no easier way to send a stock spiraling toward a 52-week low than an earnings warning, which is exactly what happened to life sciences and diagnostics company Meridian Biosciences (NASDAQ:VIVO) in late April.

For the second quarter Meridian Bioscience delivered $50.1 million in sales, a 6% boost from the year-ago quarter yet still short of analysts' lofty expectations for the diagnostics company. Specifically, Meridian noted seasonal weakness in its immunoassay tests, which saw sales drop $3 million year over year. Its life sciences segment, on the other hand, saw revenue climb a robust 20% from the prior-year period. What really doomed Meridian, though, was its reduced full-year forecast, which now calls for $190 million-$195 million in sales and $0.85-$0.90 in EPS compared to a prior forecast of $203 million-$208 million and $0.98-$1.03 in EPS. 

Despite Meridian's slip-up and reduced guidance, I believe this quarter isn't truly representative of Meridian's long-term potential.

Investors should consider that the polar vortex affected practically all sectors in the first quarter, even health care diagnostics providers. Hospital emergency room counts attested to this fact, which can only mean that companies like Meridian also witnessed reduced diagnostic orders. As the weather improves, I would expect a modest rebound in Meridian's revenue growth.

Another factor to consider is the passage of the Affordable Care Act, also known as Obamacare. Because the individual mandate requires citizens to purchase health insurance by law or face an end-of-year penalty, the new law is helping to push more people toward obtaining health insurance. As more people buy insurance, the allure of going to the doctor for preventative-care visits will likely increase, which, in turn, could be a boost in life science and diagnostics orders from Meridian. It will take a few years to determine what the full effect of Obamacare will be, but I wouldn't be surprised if Meridian's diagnostic division saw a steady uptick in orders year after year.

Finally, don't discount the positive effect its recently approved Illumigene Pertussis test could have on its top- and bottom-line results. This test, targeted at identifying whooping cough, could become a sizable revenue-generator for Meridian.

Given a long-term growth rate that's likely around 10% and a sustainable dividend yielding close to 4%, I would suggest that now is the perfect time to give Meridian a closer look.

You could even say it glows
Semiconductor equipment inspection and metrology company Rudolph Technologies (NYSE:RTEC) recently reduced its outlook.

Rudolph analyst event. Source: Rudolph Technologies.

In Rudolph's first-quarter report the company delivered flat year-over-year revenue of $41.6 million with adjusted EPS of $0.03. By comparison, Wall Street had been looking for a slightly juicier $0.04 per-share profit. Rudolph noted that weakness in fabless semiconductor production has trickled down and adversely affected its bottom line. Moving forward, Rudolph doesn't expect this aspect of its business to immediately improve.

But just because the fab semiconductor business is in a cyclical downswing doesn't mean Rudolph doesn't have opportunities to impress investors.

To begin with, the company is forecasting robust second-half growth for its lithography business of "double digits" in 2014. Being vertically integrated within the semiconductor testing business Rudolph anticipates that customers purchasing back-end services will also want front-end products. If it is indeed able to capitalize on both front- and back-end sales Rudolph could have significant upside.

Also keep in mind that this is a traditionally cyclical sector, so it's susceptible to normal ebbs and flows. Rudolph comes well-prepared for shareholders with $131 million in net cash (or close to $4 per share) as of its most recent quarter. Simply put, investors are ponying up just $180 million in enterprise value for a profitable and vertically integrated business. Despite its healthy cash balance a dividend is probably out of the question, but I wouldn't rule out the possibility of a buyout considering Rudolph's impressive cash position and the fact that it's produced positive free cash flow in eight of the past nine years. If you're looking for a tech-based play with rebound potential, Rudolph Technologies could be the stock for you.

These 3 stocks may have world's of potential, but keeping pace with this top stock over the long haul may prove impossible
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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 Amazon.com and eBay. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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