Following up on yesterday’s look at this quarter’s biggest winners, I thought I’d look at this quarters' worst performing stocks from the Russell 1000. Many of them have been absolutely crushed over the past three months, but often huge value can be found in these unloved and neglected stocks.
|Ticker||Company||Total Return QTD||EV / EBITDA TTM||Op ROIC||P/E|
|CYH ||COMMUNITY HEALTH||-37.68||6.54||8.31||8.12|
|WFR ||MEMC ELEC MATER||-35.49||12.31||0.55||20.43|
|KOS ||KOSMOS ENERGY LT||-33.89||-18.45|
|CLWR||CLEARWIRE -CL A||-30.23||-20.43|
|FST ||FOREST OIL CORP||-29.69||7.31||15.77||18.65|
|SWKS ||SKYWORKS SOLUTIO||-29.32||11.98||16.04||22.81|
|DWA ||DREAMWORKS ANI-A||-28.48||11.03||18.94||4.11|
|ACI||ARCH COAL INC||-27.23||9.22||8.22||22.01|
|JNPR ||JUNIPER NETWORKS||-26.14||14.64||12.90||28.09|
|LAMR ||LAMAR ADVERTIS-A||-25.18||10.40||3.89|
|JNS||JANUS CAPITAL GR||-25.11||5.41||10.19||11.20|
|GNW ||GENWORTH FINANCI||-24.58||0.51||46.00|
|BIG ||BIG LOTS INC||-24.28||5.14||35.65||11.56|
|GDOT ||GREEN DOT CORP-A||-23.61||16.18||54.51||34.22|
|WLL ||WHITING PETROLEU||-23.47||7.20||16.10||21.62|
|ANR||ALPHA NATURAL RE||-23.09||17.77||6.25||36.26|
|CSC ||COMPUTER SCIENCE||-22.97||2.95||9.98||8.03|
That’s quite a good deal of value destruction! On average, the stocks were down almost 30% in the past quarter… and they still don’t look that cheap! The average stock here trades for an EV / EBITDA well over 10 and a PE over 25.
But just because the list looks expensive doesn’t mean value can’t be found here.
For example, Big Lots (BIG) trades for just over 5 times EV / EBITDA despite a history of strong returns, great management, and earnings growth straight through the recession. In past years, most discount retailer buyouts have been for 9-10x EV / EBITDA, and at that valuation shares would be worth over $60 (almost a double from today’s price!). There’s even a catalyst in place: management tried to auction the company off earlier, but dropped the process when they deemed all the bids substantially undervalued the company.
Another potentially undervalued name investors may want to look at is Computer Sciences (CSC). Shares are dirt cheap, trading for under 3x EV / EBITDA and well under 8x forward earnings. The company has a solid 2.2% dividend yield, and could be poised for rapid dividend increases in the future. Even without a dividend increase, the market is pricing in a very, very dim future for a company with a history of strong earnings and cash flow, and investors may be wise to take advantage of that.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.