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Some well known large cap stocks have been hit very hard the past couple months. This has created some potential buying opportunities. The stocks below are trading at valuations that appear to be a major buying opportunity for any long-term investor. Some of these stocks fell on earnings disappointments, analyst downgrades, competitive concerns or lowered guidance. Often these are short-term events, so these situations and low prices often provide the best buying opportunities.
While many investors are now climbing over themselves to buy overvalued oil stocks at 20 to 25 times earnings, I am taking profits in the oil sector and investing some of the proceeds in these great American companies at bargain prices. By comparison, these names are trading at 7 to 12 times earnings and are likely to hold up well in the next period of market turmoil. While you wait for the market to appreciate these icons more fully, you can collect a high dividend yield in some of these stocks. Here are the six stocks:
Intel Corporation (NASDAQ:INTC) shares are trading at $19.72. The 50 day moving average is about $21.08 and the 200 day moving average is about $20.24. Earnings estimates are about $2.04 for 2011 and $2.20 for 2012. This gives INTC shares a PE ratio of only about 10 times earnings. The dividend is 72 cents per share, which is a yield of about 3.6%. Intel has a huge amount of cash on the balance sheet --about $20 billion.
The opportunity in Intel: Intel shares have dropped recently due to a downgrade and over concerns that smaller rivals are taking market share. Clearly, PC sales are down as more people buy tablets like the iPad. However, in the long run, this company offers growth potential, a solid dividend, a fortress-like balance sheet and a low PE ratio which makes this a low risk way to invest in technology. Just in case they have a earnings miss or bad guidance over the issue in Japan, I plan to only take a partial position and buy more on dips.
Merck (NYSE:MRK) is trading at $33.07. These shares have a 52 week range of $30.70 and $37.97. The 50 day moving average is $32.55 and the 200 day moving average is $34.34, so these shares are trading close to support levels (the 50 day moving average).
Earnings estimates for MRK are about $3.69 per share in 2011 and $3.85 for 2012. This puts the PE ratio at about 8. Book value is stated at $17.64. MRK pays a healthy dividend of $1.52 per share, which is equivalent to a yield of 4.7%.
The opportunity in Merck: I think these shares are a bargain; the PE ratio is low and the dividend is almost 5%, so I have been buying Merck shares in the recent drop. Drug stocks have historically done well in times of inflation, as they can more easily raise prices.
General Motors (NYSE:GM) shares are trading at $31.28. They reported earnings which disappointed the market, and shares dropped from about $36 before earnings to current levels of around $31.28. The 50 day moving average is $34.11. Earnings estimates for GM are just over $4 per share in 2011 and even more for 2012 so the PE ratio is only about 8.
The opportunity in GM: These shares are currently out of favor over concerns about parts supplies from Japan, frequent management changes, and the potential for slower auto sales as gas prices soar over $4 in most parts of the country, etc. But, the shares are very cheap on a PE ratio basis and the other issues could easily fade out over time.
Ford Motor Co. (NYSE:F) shares are trading at $15.03. The 50 day moving average is about $15.42 and the 200 day moving average is about $14.32, so these shares are trading near strong support levels. Ford shares hit a 52 week high of $18.97 earlier this year. Earnings estimates for Ford are $1.91 per share in 2011 and even more for 2012, which puts the PE ratio at about 7.
The opportunity in Ford: These shares have been out of favor over concerns about parts supplies from Japan and the potential for slower auto sales as gas prices soar over $4 in most parts of the country. But the shares are very cheap on a PE ratio basis, and Ford's sales have been strong.
Bank of America (NYSE:BAC) shares are trading at $13.34. The 50 day moving average is about $14.09 and the 200 day moving average is about $13.37, so these shares are trading at strong support levels now. Earnings estimates are about $1.33 for 2011 and $1.87 for 2012. This gives BAC shares a PE ratio of only about 10 times earnings. The dividend is 4 cents per share per year which is a yield of about .3%.
The opportunity in Bank of America: BAC shares have dropped recently, due to news that the Federal Reserve denied their plan to pay a higher dividend. You can read about this here. In time, BAC shares offer rebound potential, a dividend that is likely to grow and a low PE ratio. If oil rises much more and we start to see the likelihood of a double dip recession increase, these shares could head even lower, so I will only take a partial position.
Cisco Systems, Inc. (NASDAQ:CSCO) shares are trading at $17.05. Cisco is a premier networking hardware company that saw a big drop in the share price on earnings results and guidance. The shares currently trade well below the 50 day moving average of $18.92 and the 200 day moving average of $20.94. Earnings estimates are about $1.59 for 2011 and $1.76 for 2012.
The opportunity in Cisco: CSCO now trades for about 10 times earnings which I think is a long-term bargain. Others think so as well; one analyst recently made a very strong case for buying Cisco shares which you can read here. This analyst evaluates the value of Cisco by breaking down the different business segments and arrives at a value of $20 to $28 for the shares.
The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.

Disclosure: I am long INTC, MRK, BAC, CSCO.
Source: 6 Dirt Cheap Large Cap Stocks