There are a number of reasons seemingly good stocks get beaten down. Sometimes, those reasons represent outstanding opportunities for investors bold enough to take a chance. Three that come to mind are beleaguered chip giant Qualcomm (QCOM -3.59%), amusement park mainstay Cedar Fair (FUN 0.80%), and transportation logistics leader and precious metals upstart McEwen Mining (MUX -3.58%).
Down but not out
Tim Brugger (Qualcomm): At first glance, Qualcomm may appear to be an unattractive stock, even for bold investors. With legal snafus still pending -- though some, including the patent licensing allegations by South Korea, have been settled -- some investors may think there are too many questions and not enough answers. That is exactly why Qualcomm is worth a look.
As expected, Qualcomm's fiscal third quarter was negatively affected by longtime customer Apple's decision to not pay its suppliers, which in turn didn't pay Qualcomm. Last quarter's $5.4 billion in sales was an 11% drop compared to 2016. And excluding one-time items, earnings per share sank 28% to $0.83 versus last year's $1.16.
Thing is, the legal troubles with the Federal Trade Commission and Apple are already factored into Qualcomm's depressed stock price. Case in point: At a meager 12.4 times forward earnings, Qualcomm is trading at nearly half its peer group's average of 23.5 times earnings.
Not only does Qualcomm represent tremendous value for investors bold enough to dive in, its current 4.45% dividend yield is more than twice its peer average of just 2.1%, which should help patient investors bide their time until the legal "smoke" clears.
Qualcomm stock isn't for the faint of heart given the questions that surround it. However, outstanding value, an industry-leading dividend, and forays into cutting-edge marketing including the Internet of Things (IoT) and virtual reality (VR), to name a few, make it worth serious consideration.
Fun for everyone
Rich Duprey (Cedar Fair): When life gives you lemons, make lemonade, and when Mother Nature gives you bad weather, invest in amusement parks. Cedar Fair has been beaten up a bit because of bad weather that held back attendance, but the theme park operator recently said its year-to-date revenue was down only 1%. That suggests an underlying strength in its business that should allow it to rebound, even after the hurricanes that hit.
Shares of Cedar Fair are down 11% from their recent highs, though they remain up about 8% over the past year. And while the stock trades at 27 times earnings and 18 times next year's estimates, meaning it doesn't look like a bargain-basement stock, the fact that it also trades at only 13 times the free cash flow it produces suggests the market is undervaluing it.
What also makes it attractive is the portfolio of 11 amusement parks and two water parks it operates in North America, with the Cedar Point Park in Sandusky, Ohio, being the cream of the crop. Even so, Cedar Fair is engaging in an upgrade program at its water parks to boost attendance and adding a new indoor sports complex at Cedar Point to help increase off-season revenue.
The amusement park operator also pays a dividend of $3.42 per share that currently yields 5.3%. With a history of raising its payout by double-digit rates (though the last increase was only 3%), Cedar Fair is a stock investors could like rain or shine.
This gold stock could be worth your attention
Neha Chemaria (McEwen Mining): Gold prices have rallied 13% so far this year, but investors in McEwen Mining haven't had any luck with their investments. Decelerating production and a just-concluded dilutive equity offering to purchase the Black Fox mine has robbed the stock of sheen, pulling it down almost 31% year to date as of this writing. If you're a risk taker, consider this drop in McEwen stock an opportunity.
The problem with McEwen is that its primary mine, El Gallo 1, is nearing the end of its life at a time when the company has just turned profitable. Now, that isn't an issue you can ignore, but it's not that McEwen isn't doing anything to fill the potential production gaps, either. The miner's move to buy the Black Fox complex from Primero Mining, for instance, is projected to boost its gold equivalent ounces production by roughly 16% next year.
Even if we discount Black Fox and other Timmins' camp investment that McEwen recently made from its production forecasts, the miner could still see its gold production shoot up by nearly 70% by 2019 as its Gold Bar mine in Nevada and El Gallo 2 in Mexico come on line. That's not a bad deal at all, and the sharp drop in McEwen's shares suggests that the projected decline in its 2018 production may have already been factored into its stock price.
Of course, McEwen may have a tough time sustaining profitability in the near term, but its growth plans look encouraging. That's where bold investors with a strong risk appetite and a long-term view can find value in McEwen today.