We think the eight stocks below are "buys," at the time of writing. And so do mainstream analysts. All of the names below are trading under $20 and have been given the "buy" nod by a ranked-analyst over the past six months. As always, use the list below as a starting point for your own due diligence:
General Electric (GE): GE has a market cap of $195 billion and a P/E ratio of 14.6. The stock also offers a dividend of $0.60 (3.25%). GE is one of the most diversified companies around, with operations all over the world in many different fields, including finance, technology, energy and more. In 2010, this Buffett favorite made $150.21 billion in revenues, which was a drop of 4.19%, after dropping by 14.1% in 2009. GAAP/non-GAAP EPS crept up by 4.95% to $1.06, after dropping by 41.28% in 2009.
Also, the EBT margin improved from 6.6% to 9.46%. In 2011, analysts expect EPS to be between $1.24 (+16.9%) and $1.38 (30.1%). In the earlier part of the 2000s, these shares traded 2.0 to 2.5 times sales per share. Because the company has a debt to equity ratio of 2.47, we expect GE shares to continue to trade in the neighborhood of 1.5 times sales per share, which means shares could fetch around $30 apiece in 2012.
Chimera Investment (CIM) This huge yield play is currently yielding 16%. The company grew profits by 64.47% to $533 million in FY 2010 through October, after posting a return to positive territory in FY 2009 by drawing in $324 million in profits from -$120 million in FY 2008. For Q1 2011, the company made $156.22 million in profits. In comparison, Q1 2010 resulted in $95.46 million in profits.
Trading in the high 3s, it beat earnings estimates in many of the past quarters. This play is not for capital appreciation, but it is for the dividend payments. The company invests in U.S. government and private residential mortgage-backed securities representing interests in obligations backed by pools of mortgage loans.
Annaly Capital Management (NLY) This company has been around since 1997, and has paid a healthy quarterly dividend going back 10 years. The most recent dividend was $0.62, which is a 13.4% current yield.
The company also beat 2010 earnings expectations, reigning in $2.60 per share compared with $2.44 in analyst estimates. The company invests primarily in mortgage pass through certificates, collateralized mortgage obligations and other MBS representing interests backed Ginnie Mae, Freddie Mac (FMCC.OB) and Fannie Mae (FNMA.OB). Revenues fell by 30.85% in 2010, after increasing by 70.83% in 2009 and 154.11% in 2008.
Also, the company posted fat EBT margins in 2010 and 2009 with 88.32% and 93.79%, respectively. We think this is a safe idea for a retirement portfolio. And a buy a current levels.
Cloud Peak Energy (CLD): On the heels of Alpha (ANR) bidding for Massey (MEE), Cloud Peak looks ripe for a buyout. We think shares could fetch $30 apiece and, independent of a buy-out, Cloud Peak's earnings multiple has plenty of room to expand. Cloud Peak generated $1.37 billion in revenues in 2010, which was a decrease of 1.96%, after rising 12.78% in 2009. The EBT margins in 2010 and 2009 were 15.46% and 18.2%, respectively. The respective ROEs were 8.6% and 150.9%. The 30-day put/call ratio is 0.5. Cloud Peak Energy is the third-largest U.S. coal producer.
We think the company deserves a take-over premium. However the current share price is below fair value on a discounted cash flow basis that ignores any possibility of a takeover. Cloud Peak is the only remaining pure-play Powder River Basin coal company. Any possibility of exports out of the West Coast (likely Washington State's Columbia River) would likely ignite shares.
Powder River Basin Coal is low in sulphur content and much easier to mine than Appalachian coal. The Powder River Basin, located in Wyoming and parts of Montana, is far from major metropolitan areas and made its coal less attractive than coal in the high-consumption East. We think that will change once foreign export and railroad infrastructure capabilities expand.
First American (FAF): First American is the second-largest title insurance operation in the U.S. and has some exposure to the rest of North America and many emerging markets abroad. This insurer retains an 11% stake in CoreLogic (CLGX), the business information entity spun out from First American last year.
We think shares could trade around $30 apiece by early next year. First American has done a great job scaling back its cost structure in the wake of the recent housing bust. As transactions return to a more normal level, First American will benefit tremendously and most of the benefit will translate into strong bottom line numbers. We think First American is a better bet than Fidelity National (FNF) as a valuation call.
UTI Worldwide (UTIW): Operating through subsidiaries, UTI is a supply chain services and solutions company. UTI has a market cap of only $1.92B. Analysts say the company is focused on improving its efficiency and profitability through its processes rather than acquisitions.
The stock currently trades at a 28 P/E multiple around $19 per share. The company had EBITDA of $176.47M in the last 12 months at a 2.65% operating margin. Looking forward, we think shares could trade around $30-32 apiece with the company's multiple contracts and on the back of very strong earnings growth over the next 12 months. We think UTI is a better bet than Expeditors International of Washington (EXPD) because UTI is selling at a discount to fair value while Washington is fairly valued, in our opinion.
Silvercorp Metals (SVM) The company is engaged in the acquisition, exploration, development and mining of high-grade silver-related mineral properties in China and Canada. Silvercorp is the largest primary silver producer in China through the operation of the four silver-lead-zinc mines at the Ying Mining Camp in the Henan Province of China.
The company has applied for a mining permit for its GC silver-lead-zinc mine in the Guangdong Province and recently announced the acquisition of a 70% interest in the BYP gold-lead-zinc mine in Hunan province. In Canada, Silvercorp is in preparation of applying for a Small Mine Permit for the Silvertip high grade silver-lead-zinc mine project in northern British Columbia to provide a further platform for growth and geographic diversification.
Revenues are +16.5% in the company’s 9M'11 compared to 9M'10 or $124.9 million versus $107.2 million. Gross margin in 9M'11 was a solid 74.57%. It was 73.97% in FY 2010 through March. GAAP EPS went from - $0.11 in FY 2009 ending in March to $0.24 in FY 2010.
The first nine months of FY 2011 produced a non-GAAP EPS of $0.30 versus 9M'10’s $0.18. In FY 2012, the company expects to produce 5.6 million ounces of silver. Moreover, Silvercorp shares trade with a P/S multiple of 15.8. Investors have big plans for this one. The company also has no long term debt.
Sirius XM Radio's (SIRI) This company's sky-high price-earnings ratio has been the talk of the town as of late, but we think much of the bearish opinion on this name is misplaced. Sirius' fiscal situation, while concerning on the surface, is about to improve.
Capex is headed down significantly starting in 2012; and 2011 free cash flow figures along should be in the range of 300 million. Currently, Sirius still has 600 million in cash on its books. Sirius' ability to raise operating cash flow has led to improvement in the company's credit rating. From a valuation standpoint, Sirius' assets alone may be worth the current share price. Sirius owns valuable spectrum and satellites.
We think that steady accumulation of Sirius shares by the larger investment operations and their clients will continue as it has over the last year. Our anecdotal assessment of retail broker choices for "speculative" plays shows that Sirius remains a favorite, especially since Citigroup (C) shares underwent a reverse-split. Speculation in Sirius shares extends to the short side as well. Shareholders can view the 8% short float as a basket of inevitable buyers.
For an opportunity to earn outsized returns in this name, we think the January 2012 and January 2013 call options at the $2.50 strike offer the best opportunities should shares double over the next 12 months.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.