Investors have had a very rough couple of weeks with the U.S. markets plunging about 10% over a variety of concerns. Historically, it is times like this when cool, calm and collected investors make a strategic plan and buy stocks with great values. There are numerous signs of capitulation according to a recent CNBC article and that usually means markets are cheap and due to rebound soon. According to the article, "...some strategists were beginning to see the signs that investors were panicking and selling was reaching its apex. While "capitulation" sounds ominous, it actually would represent the beginning of a turning point that whether near-term or long-term represents a turning point for the battered market."
I expect the markets to possibly show a little more weakness, which will give investors and shorts a brief window of opportunity to buy and cover shorts cheaply, but then there should be a sizable rally. Based on this, here are a number of cheap stocks that are very oversold and due for a snap back rally of 30% to 50% in the next couple of days and weeks:
Southwest Airlines (LUV) is a leading passenger airline with a fleet of about 548 aircraft in the USA. This stock recently hit a 52-week low and is trading below book value. Management seems to think the stock is undervalued and recently announced it would buy back $500 million worth of shares, read more on that here:
Here are some key points for SWA:
Current share price: $8.47
The 52-week range is $8.09 to $14.32
Earnings estimates for 2011: 59 cents per share
Earnings estimates for 2012: 99 cents per share
Annual dividend: 2 cents per share, which yields .2%
Book value: $8.81 per share
Hartford Financial Services (HIG) is a leading insurance company and also offers other financial products both in the USA and globally. Recently, Hartford announced that 2nd quarter profits would be well below expectations due to asbestos litigation and losses from major storms. This lower than expected profit has caused the shares to drop along with the stock market and has created a great buying opportunity for longer term investors. Insurance is a must for most people and Hartford is deeply undervalued at half of book value.
Here are some key points for HIG:
Current share price: $20.57
The 52-week range is $18.81 to $31.08
Earnings estimates for 2011: $3.02 per share
Earnings estimates for 2012: $4.02 per share
Annual dividend: 40 cents per share, which yields 1.9%
Book value: $45.93 per share
Chimera Investment Corporation (CIM) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities, and both commercial and residential mortgage loans. With a 16% yield and a share price below book value, this looks like a great buying opportunity.
Here are some key points for CIM:
Current share price: $3.01
The 52-week range is $2.62 to $4.36
Earnings estimates for 2011: 60 cents per share
Earnings estimates for 2012: 59 cents per share
Annual dividend: 52 cents per share, which yields 17%
Book value: $3.45 per share
ATP Oil and Gas Corporation (ATPG) is an oil and gas exploration and development company. These shares traded for about $50 per share in 2008, before the financial crisis and after a sharp drop with the markets, the stock appears to be a bargain. This company has strong growth potential and profits are expected to be strong in 2012. Just about one week ago these shares traded for over $15 and could rebound quickly from very oversold levels.
Here are some key points for ATPG:
Current share price: $10.71
The 52-week range is $9 to $21.40
Earnings estimates for 2011: a loss of $1.62 per share
Earnings estimates for 2012: a profit of $1.71 per share
Book value: 5 cents per share
Morgan Stanley (MS) is a leading investment banking company that offers a wide range of financial services and products. Morgan Stanley is a leader in mergers and acquisitions and this part of their business should continue to grow. This stock is trading well below book value and for just over 6 times 2012 earnings. A handful of executives at Morgan Stanley just bought millions of dollars worth of stock, see the recent purchases here
Here are some key points for MS:
Current share price: $20.02
The 52-week range is $19.05 to $31.04
Earnings estimates for 2011: 96 cents per share
Earnings estimates for 2012: $2.77 per share
Annual dividend: 20 cents per share, which yields 1%
Book value: $31.45 per share
Phoenix Companies, Inc. (PNX) offers annuities and life insurance products in the United States. This company is facing some challenges such as slow sales, but it has a book value of nearly 4 times the current stock price. This stock was trading around $2.40 a couple weeks ago and could be set to rebound soon.
Here are some key points for PNX:
Current share price: $1.97The 52-week range is $1.61 to $2.86 Earnings estimates for 2011: 42 cents per share Earnings estimates for 2012: 39 cents per share
Book value: $9.86 per shareData is sourced from Yahoo Finance. No guarantees or representations are made.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.