In recent months I've been digging into a group of stocks investors have kicked to the curb. Most of these stocks are wading against the tide as their industries struggle, or they have company-specific problems that are impacting results. In many cases, the companies are unprofitable.
However, these stocks are also trading at a fraction of tangible shareholders' equity and if selected carefully and bought as a diversified portfolio of beaten-down stocks, can have the potential for big returns.
Of the stocks I've highlighted so far, we've seen Marshall & Ilsley get bought out by Bank of Montreal, and just yesterday Hercules Offshore (Nasdaq: HERO) leapt after it found itself in a position to buy up the assets of bankrupt Seahawk Drilling (Nasdaq: HAWK) at a fire-sale price.
I don't expect that all of my beaten-down picks will work out. In fact, I assume that quite a few won't do much of anything and some will turn sour. But by buying in a group, I expect that the big winners will outweigh the lesser performers.
Of course to keep a portfolio stocked with these stocks, we need to have a fair number of potential opportunities on our radars. So, with that, here are five more beaten-down stocks that may be worth buying.
|
Company |
Market Cap |
Price-to-Tangible Book Value |
Trailing-12-Month Cash Flow From Operations |
|---|---|---|---|
| Overseas Shipholding Group (NYSE: OSG) | $1.1 billion | 0.6 | $47 million |
| Eagle Bulk Shipping (Nasdaq: EGLE) | $261 million | 0.4 | $96 million |
| SWS Group (NYSE: SWS) | $199 million | 0.6 | $86 million |
| Xinyuan Real Estate (NYSE: XIN) | $188 million | 0.4 | N/A |
| Bluegreen (NYSE: BXG) | $143 million | 0.4 | $142 million |
Source: Capital IQ, a Standard & Poor's company. N/A = not applicable.
Make no mistake, these companies are nowhere near tip-top shape. It's been a tough environment for shippers, and that's why Mr. Market has pushed down pretty much that whole group. SWS has faced dire troubles from its banking arm, while Xinyuan may have found itself in the shade of the dark cloud surrounding Chinese small-cap stocks (even if it doesn't belong there). And as for Bluegreen, it's probably enough to say that the company is in the business of timeshares and property development.
But the market has applied such a hefty discount to all of these companies that I think there's the potential for substantial returns while allowing a big cushion in case things do get worse.
