Almost every company faces major challenges sooner or later, that is just a part of being in business. Investors often sell their shares as soon as any problems arise and the stock price in these companies can drop well below their long term fair value. Often these challenges can be overcome with time and solid decisions from management. Buying stock in companies facing shorter term challenges can give longer term investors a great opportunity for cheap shares. Here are a few stocks that are facing challenges that might be overcome in time:
American Superconductor (NASDAQ:AMSC) is trading at about $7.92. These shares have a 52 week range of $7.15 and $38.88. The 50 day moving average is $8.77 and the 200 day moving average is $22.43, so the shares are trading well below these key support levels. Earnings estimates for AMSC are about 20 cents per share in 2011. Book value is stated at $9.86 per share.
Why American Superconductor shares could rebound: This stock fell when a major customer refused shipments, however this company has quality products and technology which should be in demand in the long run. I think it makes sense to buy an initial stake now and possibly more on any further dips since it is hard to say if these shares have bottomed. It could take a long time for this one to rebound so I would not commit much money here.
United Continental Holdings Inc., (NYSE:UAL) shares are trading at $19.95. United is a major global airline. The 50 day moving average is $23.23 and the 200 day moving average is $24.68. UAL is estimated to earn about $3.49 per share in 2011 and $5.19 in 2012. This puts the PE ratio at just over 5. Book value is listed at $5.80 per share.
Why United shares could rebound: Fuel costs are a major expense for any airline. Recently, this stock has moved down as oil has moved up. Also, concerns over the global economy have put pressure on airline stocks. However, the stock looks cheap when looking at the PE ratio and as long as the global economy doesn't weaken significantly, this looks to be a good time to average in for the long run.
Royal Caribbean Cruises (NYSE:RCL) shares are trading at $36.49. RCL is a major cruise line company, based in Miami. The 50 day moving average is $36.93 and the 200 day moving average is $40.97. Earnings estimates for RCL are for a profit of about $3.18 cents per share in 2011 and $3.82 in 2012.
Why RCL shares could rebound: Just as with airlines, fuel costs are a major expense for cruise lines. Rising fuel costs and concerns over the health of the US economy and job growth has been pressuring this stock. If the economy and the unemployment rate improves, these shares have upside.
Janus Capital Group, Inc. (NYSE:JNS) is trading around $9.11. Janus is a leading investment manager and is based in Colorado. The 50 day moving average is $9.58 and the 200 day moving average is $11.56. These shares have traded in a range between $8.55 to $14.57 in the last 52 weeks. Earnings estimates for JNS are for a profit of about 89 cents per share in 2011 and 93 cents in 2012.
Why Janus shares could rebound: This company has been facing outflows from investors in some of their mutual funds. This reduces fees and profits. Investors have been redeeming their holdings in some Janus due to under performance. You can read more about the outflows here. However, almost all investment companies have periods of weak returns, and if Janus improves their performance, revenues, profits and the stock could rebound.
MGIC Investment Corp. (NYSE:MTG) is trading around $4.17. MGIC is a surety and title insurance company and is based in Wisconsin. The 50 day moving average is $6.55 and the 200 day moving average is $8.53. These shares have traded in a range between $3.90 to $11.79 in the last 52 weeks. Earnings estimates for MTG are for a loss of about 93 cents per share in 2011 and profit of 79 cents in 2012.
Why MGIC shares could rebound: This stock has plunged and recently hit new 52 week lows over concerns that the housing crisis will continue to lead mortgage insurers like MTG into paying claims for the foreseeable future. However, the stock appears to be oversold and insiders have been buying repeatedly, see the insider buying here.
Stewart Information Services Corp. (NYSE:STC) is trading around $10.57. Stewart is a surety and title insurance company and is based in Texas. The 50 day moving average is $10.14 and the 200 day moving average is $10.79. These shares have traded in a range between $8.43 to $12.74 in the last 52 weeks. Earnings estimates for STC are for a loss of about 24 cents per share in 2011 and profit of 97 cents in 2012.
Why Stewart shares could rebound: This stock could take awhile to rebound as any stock tied to the housing market might. Analysts are expecting far better profits for STC next year, and if those profits are realized the shares should rebound.
The data is sourced from Yahoo Finance and Stockcharts.com. 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.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in UAL, MTG over the next 72 hours.