3 Value Stocks You Can Buy Right Now

Just as we often examine companies 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.

Dripping with long-term potential
Want an easy way to scare short-term traders under the bed covers? Tell them you know of a great water utility stock in California just begging to be bought!

Source: Flickr user Joe Shlabotnik.

Shareholders in water utility SJW (NYSE: SJW  ) have had a pretty rough year -- and it got just that much worse after my terrible joke. SJW is a water and waste treatment services provider in California and Texas, and you've likely heard that California is suffering through a record drought this year. Droughts aren't uncommon in California -- I should know, having lived there for 25 years of my life -- but the required water rationing that comes accompanies them often reduces water consumption and can negatively impact water utilities' profits.

In the second quarter, SJW reported that its operating revenue fell 5.1% year over year to $70.4 million as rate increases were more than offset by a decline in customer water usage due to drought regulations being in effect. Despite this drop in revenue, and a modest increase in water production expenses of 2%, SJW still managed to deliver $6.8 million in net income for the quarter, down from $7.4 million in the year-ago period. 

California is the leading producer of strawberries in the U.S. Source: Flickr user James Lee.

With profits and revenue falling, you're likely wondering why I'd recommend SJW as an investment. It's simple: Water is a basic need, no matter the conditions of the market or the climate. Even with stringent regulations by California, businesses and consumers can only cut back so much. Let's not forget that California is the nation's leading agricultural state and has been so for the past 50 years, so the water needs of farmers will continue to remain high.

Another point of contention is that most water utilities are regulated, which often means predictable cash flow and steady or improving pricing power. Only the occasional infrastructure upgrade keeps water utilities from drowning in cash flow, so to speak. This excess cash allows for infrastructure reinvestment, acquisitions that add to their customer base, and, best of all, dividends!

Perhaps the best aspect of water utilities is their low volatility and healthy dividend growth. SJW is among a group of just 54 publicly traded stocks who've raised their dividend in at least 40 straight years. SJW, for example, has boosted its annual payout in 46 consecutive years and currently pays out a yield approaching 3%. Not to mention that of the five water utilities that have boosted their dividends for at least 40 years running, SJW's dividend growth since 2002 is the second-highest at 63%, trailing only American States Water.

With the expectation that we've seen the worst of SJW's profit dip, I'd use SJW's share price swoon as the perfect opportunity to take a deeper dive into this value stock.

Fueling America's future
If you were to take a good look at energy infrastructure company Chicago Bridge & Iron (NYSE: CBI  ) , known better as CB&I, you'd suspect the company widely missed Wall Street's expectations in its latest quarter -- but that couldn't be further from the truth.

For the second quarter, CB&I reported revenue of $3.3 billion, up nicely from the $2.9 billion reported in the year-ago quarter, while adjusted net income per share improved to $1.31 from $0.98 in the prior-year period.  


Source: Flickr user FarbenfroheWunderwelt.

The big head-scratcher, then, is why CB&I has dipped in recent months. I suspect it has a lot to do with the perception of global energy infrastructure spending. We've begun to see near-term signs of slowing GDP growth in China and Europe, and there are persistent concerns that U.S. government contract spending could slow as Congress looks to move toward a more balanced budget, which certainly has the potential to be a headwind for CB&I. Also, since the companies that comprise the oil and gas industry are motivated by oil and gas spot prices, and oil has dipped in recent weeks, it could imply that global perceptions of the energy market are weakening.

While fluctuations in oil and natural gas are normal, what's undeniable -- especially in the U.S., where there have been a bevy of onshore shale finds over the past decade -- is that energy demand will only increase. This includes the demand for more electric-generating plants -- both fossil-fuel-based and alternative-energy-based -- as well as transmission and storage potential for underground liquid and gas assets. It should come as no surprise, then, that CB&I's backlog hit a record level of $31.5 billion during the quarter.

Even more importantly, CB&I's decision to purchase Shaw Group in 2012 has turned out to be ingenious. Shaw's operations added everything that CB&I had been missing. Shaw's business was primarily geared toward maintenance and retrofitting services for the energy industry, which is a segment that brings in predictable cash flow, which investors love because it cuts down on order volatility. In addition, Shaw has strong tie-ins with the oil and gas industry in and around the Gulf of Mexico, provides disaster-recovery services to the U.S. government, and handles maintenance on a good chunk of nuclear power plants within the U.S. Not to mention that Shaw's addition more than doubled CB&I's backlog.

Given that CB&I is expected to grow more than 10% for the next couple of years and is valued at a mere 10 times forward earnings, I believe it is the very definition of a value stock.

Not going gentle into that good night
Some might say that challenging chipmaker Intel (NASDAQ: INTC  ) is a lost cause. Yet Applied Micro Circuits (NASDAQ: AMCC  ) , a provider of connectivity and computing solutions, views the chance to trump Intel as the opportunity of a lifetime.


Source: Intel Free Press via Flickr.

Despite an expanding economy and an increasing appetite for high-growth tech investments, Applied Micro Circuits has seen its stock falter over the trailing year, dropping by more than a third to levels not seen since June 2013. The catalyst for the pullback has been an ongoing shift in Applied Micro's business focus away from its PowerPC legacy products in favor of next-generation connectivity and cloud-computing products. For the quarter, revenue dipped to $50.3 million from $54.1 million in the prior-year period, while its breakeven adjusted EPS was only good enough to meet Wall Street's expectations. But given the company's notable dip in legacy services, the Street lowered its full-year EPS expectation from $0.18 per share to breakeven.

If this situation sounds familiar, it's because Intel is going through the same growing pains now as it transitions away from PC-focused chips toward chips that will be the centerpiece of cloud-based servers. Connectivity providers like Intel and Applied Micro are having to spend more on research and development, which is pushing their costs higher and threatening to adversely affect their profitability.

Source: Flickr user Bob Mical.

While the near term has certainly gone to the bears, the potential growth opportunity for Applied Micro's X-Gene microserver chip moving forward is enormous. This new low-power server chip was made utilizing intellectual property that Applied Micro licensed from architectural powerhouse ARM Holdings. If businesses begin to adopt microservers in their data centers, which are believed to be more cost effective and energy efficient, Applied Micro could see its sales soar.  

Following what's expected to be a double-digit revenue contraction in fiscal 2015, current Wall Street forecasts call for top-line expansion of 33% in 2016, with growth mostly tied to the acceptance of the X-Gene chip. If Applied Micro can establish itself as a serious competitor to Intel in the server space, then its X-Gene chip, coupled with its $99 million in cash and debt-free balance sheet, could be the carrot that lures in a prospective buyer.

A forward P/E of 21 might look unappealing to some, but Applied Micro's bountiful cash position, coupled with legacy Power-PC cash flow and growing X-Gene potential, make this a value stock tech-hungry investors may want to dig into.

If you're looking for value stocks, look no further than these high-yield dividend stocks handpicked by our analysts! 
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


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