These stocks are all on the comeback trail. All the stocks selected have been beaten down significantly recently for various reasons. Some have already begun to march back to previous levels while others have yet to gain much traction such as Apple Inc. (AAPL), currently trading only 4% above its 52-week low.
Despite their past transgressions, I see greener pastures in the near future provided by solid catalysts. In the following sections we will dig deeper and attempt to determine if these dogs can truly hunt. Nonetheless, this is no substitute for doing your own due diligence.
We will perform a review of the fundamental and technical state of each company. Furthermore, we will attempt to discern if any upside potential exists based on a sector, industry or company specific catalyst. The following table depicts summary and performance statistics for the stocks for Monday.
The company is trading 37% below its 52-week high and has 41% upside potential based on the consensus mean target price of $618 for the company. Apple was trading Monday for $436.76, up nearly 2% for the day.
Apple is fundamentally sound. Apple has a ridiculous forward P/E ratio of 8.61, a PEG ratio of .51 and trades for approximately 9 times free cash flow. The company has no debt and $137 billion in cash. The company pays a dividend with a 2.50% yield. Margins took a hit yet the company still achieved a 25.35% net profit margin.
Apple has been in a well-defined downtrend for the past five months. The stock has fallen for a high of over $700 to a low of approximately $420 after announcing earnings. The stock has been consolidating at this level for the past couple of months.
Apple is completely out of favor. As a contrarian investor, Apple looks ripe for the picking. The risk/reward ratio looks good. The stock has taken several hits as of late and has never fallen below the $420 mark. I see this as a major buying opportunity. I predict Apple will raise the dividend, launch a low end iPhone to address emerging markets and regain their innovative status by introducing the iWatch and iTV later this year. These catalysts along with their normal product refresh cycle makes this stock a buy here.
BlackBerry Inc. (BBRY)
The company is trading 16% below its 52-week high, yet 29% above the consensus mean target price of $10.90 for the company. BlackBerry was trading Monday for $15.24, up nearly 1% for the day.
Fundamentally, BBRY has many positives. The company's net profit margin is improving quarter over quarter. The company trades for 10 times free cash flow and 83% of book value. BBRY has no long-term debt. EPS is expected to rise by 64% next year.
Technically, BBRY has been in a long-term uptrend since hitting a low of $6 in late September. The stock is currently trading near the apex of a descending triangle pattern. A breakout one way or the other is approaching rapidly.
BlackBerry just reported earnings. The results were mixed. BBRY beat on EPS yet missed on revenues. You can read the transcript here. The company has a large portion of the current subscriber base waiting for the Q10 phone with the QWERTY keyboard. I think this will be a big catalyst for the stock in 2013. The stock is a buy here.
Cisco Systems, Inc. (CSCO)
The company is trading 4% below its 52-week high and has 11% potential upside based on the consensus mean target price of $23.42 for the company. Cisco was trading Monday at $21.17, up nearly 2% for the day.
Fundamentally, CSCO looks solid. Cisco has a forward P/E of 9.92. Cisco's quarter-over-quarter EPS and sales growth rates are 46% and 5%, respectively. Cisco's net profit margin has increased to 19.72%. Cisco has a dividend with a yield of 3.25%. The company is trading at 13 times free cash flow.
Technically, Cisco has been performing well. The coveted golden cross has been achieved. The stock is currently consolidating just below the 50-day sma.
Software-defined networking is shifting some value to software rather than hardware according to UBS. Nevertheless UBS argues, "Hardware innovation, especially in network elements where performance, latency and resiliency matter in defense of Cisco." I definitely agree. Cisco is on the cutting edge of network hardware innovation.
Furthermore, Cisco bumped its quarterly dividend 21% to $0.17/share. The annualized yield on the stock is now 3.25%. Cisco is making all the right moves. The stock is a buy here.
Ford Motor Co. (F)
The company is trading 8% below its 52-week high and has 16% upside based on the analysts' mean target price of $15.14 for the company. Ford was trading Monday for $13.11, up almost 2% for the day.
Fundamentally, Ford has several positives. The company has a forward P/E of 7.72. Ford is trading for 18 times free cash flow and approximately 3 times book value. EPS next year is expected to rise by approximately 20%. The company pays a dividend with a yield of 3.10% and has a PEG ratio of 0.86 and a net profit margin of 13.64%.
Technically, Ford is currently in a well-defined uptrend. The stock has been in a solid uptrend since the last quarter. The stock achieved the coveted golden cross where the 50-day sma crosses above the 200-day sma. Now the stock is in breakout position at the apex of a descending triangle.
Ford's March U.S. sales were up 5.7% to 236,160 vehicles, beating the estimate of analysts calling for a 4.4% gain. The solid month was led again by the Ford Fusion model with sales of 30,284 vehicles to set an all-time record.
Ford's issues are in Europe. Nevertheless, they have been working on right sizing European operations for the last few quarters. With improving sales in the U.S. and Ford stopping the bleeding in Europe, I posit the impending breakout will be to the upside. Ford is a solid buy here.
Facebook Inc. (FB)
Facebook is trading 43% below its 52-week high and has 29% potential upside based on a consensus mean target price of $33.28 for the company. Facebook was trading Monday for $25.91, up over 1% for the day.
Facebook's fundamentals are mixed. The company has a forward P/E of 33. EPS for the next five years is expected to rise by 30% and 36% next year. Sales are up quarter-over-quarter and the company has a net profit margin of 1%.
Technically, Facebook looks mixed. The stock has achieved the coveted golden cross, yet has recently broken through support at the 50-day sma and is now testing long-term support at the 200-day sma.
On Thursday, March 28th Facebook sent out an invite to analysts stating, "Come See Our New Home on Android. The Facebook event is set for 1PM ET on April 4th. Sources tell TechCrunch Facebook will unveil "a modified version of Android with deep native Facebook functionality that may live on an HTC handset." However, it won't be "a full-on rewrite" of Android, which could allow Facebook to maintain access to Google (GOOG) services. I think this is a great move.
The new attitude of Facebook's management impressed me. Also, mobile revenues were up substantially last quarter and the new revenue stream created by introducing the gift program for friends intrigues me. I like the stock here and believe the street will react positively to the news on the 4th. Facebook is a buy here.
The Bottom Line
I believe these stocks are buys that have major upside potential in 2013. I see these stocks continuing to move higher as the year unfolds. Nevertheless, with the market trading at all-time highs and the wall of worry continuing to grow, I posit it is important to look for stocks that have strong catalysts for growth and fundamentals.
Furthermore, always remember to maintain a well-balanced diversified portfolio containing several asset classes. Use this information as a starting point for your own due diligence and research methods before determining whether or not to buy or sell a security. If you choose to start a position in any stock, I suggest scaling in to any position to reduce risk. Set a stop loss order to minimize losses even further if you wish.
Additional disclosure: This is not an endorsement to buy or sell securities. Investing in securities carries with it very high risks. The information contained within this article for informational purposes only and is subject to change at any time. Do your own due diligence and consult with a licensed professional before making any investment.