Just as we examine companies each week that may be rising past their fair value, we can also find companies potentially trading at bargain prices. While many investors would rather have nothing to do with companies tipping the scales at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to the downside, just as we often do when the market reacts to the upside.
Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.
One lustrous investment
If you hadn't guessed by now, I'm a big fan of gold and gold miners. There are multiple factors at the moment that I feel could usher in another rally in gold prices. These include weak global economies, which make gold an attractive safe-haven investment; low domestic interest rates, which make gold attractive relative to low-yielding CDs and bonds; copious U.S. money printing, which could lead to inflation; and a contrarian mentality to buy when others are fearful. That's why I think investors would be foolish to pass up on cost-efficiency mining expert Goldcorp (GG) at its current levels.
If you recall, when I statistically assessed gold miners in January on the basis of valuation, production, and debt, Goldcorp and Yamana Gold (AUY) were the only true standouts. Both Yamana and Goldcorp benefit from the mining of byproduct metals in their mines that they can then sell to offset the cost of their operations. What gave Yamana the ultimate edge -- and led to my declaration of it being the best gold miner, statistically speaking -- was its growing production compared to Goldcorp's flat year-over-year production.
However, Goldcorp has a rich history of maintaining low production costs and improving its operating efficiency. Its flagship Penasquito mine, which opened in 2010, has seen gold production improve from 168,200 ounces in 2010 to 411,300 ounces in 2012 as ore grade nearly doubled from 0.27 g/t to 0.50 g/t. Barring a 60% haircut in the price of spot gold, Goldcorp is going to continue to deliver top-notch margins and a healthy 2% yield.
Optimize your buying
Software companies these days are being judged not just by how many new contracts they gained during the current quarter, but by how well they're prepared to deal with the transition to cloud platforms. Supply-chain and workforce-optimization software developer ClickSoftware Technologies (CKSW) looks well poised to take advantage of these trends and has no business, in my opinion, being anywhere near a 52-week low.
In ClickSoftware's fourth-quarter report, the company delivered 18% software licensing growth and $1 million more in net income than the year-ago period. However, a drop-off in net income for the full-year attributable to the addition of more than 100 new employees and big cloud-computing R&D investments pummeled the previous highflier. However, short-sighted traders are going to be in for a surprise when ClickSoftware turns in top-line growth of 20% to 25% according to management's own expectations in fiscal 2013. Management went on to note that 80% of its new customers in the fourth quarter purchased its mobile solutions, solidifying its transition from PCs into mobile and cloud platforms.
Furthermore, ClickSoftware is well funded and able to expand its workforce and fund R&D without the need for debt. In fact, it ended the year with $59.4 million in cash and investments and no debt. ClickSoftware also pays out a premium dividend in the tech sector, making it an excellent income and growth play.
Give this company the "Royal" treatment
Oil exploration and production companies have had a rough go of it since April began, following U.S. oil inventory data that showed the highest oil stockpiles since 1990. With stockpiles at 23-year highs, President Obama has little worry about the U.S. being dependent on foreign oil, but it's hurt West Texas Intermediate oil prices amid still tepid domestic demand. It's also one of the primary reasons that Royal Dutch Shell (RDS.A) (RDS.B) has delivered such a miserable return this month to shareholders.
But, over the long run, I feel Royal Dutch Shell could make for a very intriguing and safe integrated oil play. One reason is the incredible energy and geographic diversification you get by investing in Shell. Shell has large natural gas assets in the various shale regions of the domestic United States as well as oil fields off the coast of Africa. Whether it needs to shift production to liquids or gas to take advantage of higher spot prices, Shell is in good shape.
In addition, Shell also has the added benefit of having a shipping, refining, and chemicals business to further offset spot price fluctuations and demand hiccups when they occur. Valued at a mere 12 times forward earnings while divvying out a 5.1% yield to shareholders, Royal Dutch Shell is a smart play on the increasing demand for oil and natural gas over the long term.
Foolish roundup
This week is all about thinking ahead. Normally, I don't like to value a company by thinking too far down the road, but Goldcorp's potential with its Penasquito mine, ClickSoftware's inroads in cloud-computing and mobile platforms, and Shell's geographically and operationally diversified asset portfolio make all three intelligent buys for the long run.
I'm so confident that these three names will bounce off their lows that I'm going to make a CAPScall of outperform on each one.
