The Dow Jones has lost more than 14% of its value during the last 12 trading sessions. There is significant news related to this loss, yet most of this reaction is based on panic rather than logic. I am considering a purchase in the following seven companies, not because I believe the losses are over but rather because I see these stocks as value in comparison to company fundamentals.
Buying into the automotive industry is looking very attractive, specifically Ford (F) and General Motors (GM). In one month Ford has lost 28% and GM has lost 22% of its value. Both companies are trading with price to earning ratios under 6. At 52 week lows I believe both of these companies are in perfect positions to buy. GM released earnings in which revenue grew 19% and profit nearly doubled. As a result of economic uncertainty the stock has traded down nearly 10%, since the announcement. Ford announced stellar earnings and previously released a mid decade report which anticipate sales increasing by 50%.
There is no analyst or economist that has a better grasp on the future of these two companies better than the companies themselves. Neither company has given any indication to make investors believe that sales are declining. Instead, both companies have offered positive developments and announced growth. The only issues that investors typically present regarding the auto industry relates to past performance, which includes debt. I prefer to look at the present and future and not dwell on the past. Therefore, I will take my chance on growth, a low P/E, and an undervalued company which makes this a great investment for years to come.
On August 2nd I stated that I would buy General Electric (GE) if the price reached $14.50. The stock is, roughly, $1 from my target price and I feel tomorrow's trading session may push it lower. The company has many strong areas in which I like as an investor. Last quarter the company announced infrastructure orders that were up 24%. The stock has traded with the market, posting a loss of nearly 20% since July 22nd and trading with a P/E of 12. The company rewards investors with quarterly dividends that consistently rise and has a solid business in place that should support additional growth. I am confident that GE will return to a range of $17-$19 in the next few months which would give investors a nice return if they take advantage of these low prices.
Citigroup (C) has now reached a point of great value. The company has posted strong numbers for 2011 yet continues to see loss. The stock has fallen over 33% during the last month after releasing strong financial results. Investors have been hesitant to invest in banks after the recession in 2008. Therefore investors have failed to consider how well the bank is performing. Most arguments regarding Citigroup are related to the past and current debt. Citigroup has performed well and has given no indications of slowing down. The company announced quarterly revenue of $16.5 billion and a net income of $3.34 billion. On September of 2007 the company announced similar results with revenue of $16.5 billion with net income of $4.8 billion however the price was $47.8 or $478 before the split. I understand there are several issues within the company but I am looking forward not backwards and I believe this company has the potential to increase P/E as investor confidence grows over the next several years. Large gains in the future should be expected making this a good buying opportunity.
Sirius XM Radio (SIRI) has seen its stock decline over 20% in five days. This occurred after the company announced earnings that showed a 20% gain in EBITDA year over year. The company announced a higher retention rate in subscribers and that 65% of all new vehicles manufactured in the United States have Sirius XM. I see this as encouraging along with news that Ford expects sales to increase 50% by 2015 which should reflect the automotive industry. If Sirius XM is standard in 65% of new vehicles and are retaining customers at a higher rate than Sirius should benefit from these future sales. SIRI is posting some of its best numbers and is not experiencing the gains to reflect company performance. The stock may slip lower but at a price around $1.60 I feel the long term gains outweigh the short term loss especially if the stock could be purchased at $1.50.
DISH Networks (DISH) has posted a loss of 24% during the last 5 days. The company is now trading with P/E under 8 and is preparing to announce quarterly results. The stock should see gains tomorrow after earnings are released, however many companies have announced great earnings and have fallen. Dish has posted increased revenue every quarter since Q3 of 2009. The first quarter of 2011 posted impressive gains in revenue and net income. During the quarter, net income more than doubled in comparison to the previous 4 quarters. There is a lot of excitement surrounding this company as many investors believe recent acquisitions of companies such as Blockbuster (OTC:BLOAQ) will separate DISH from competitors such as DIRECTV (DTV) . The stock may drop lower but I believe tomorrows earning report will surpass expectations and send the stock back to positive territory. I anticipate that any price near $23.00 will return large profits in the coming months.
During the last five days Jazz Pharmaceuticals (JAZZ) has dropped more than 20%. JAZZ is one of the fastest growing pharmaceutical companies in the market with yearly gains of 244%. JAZZ released quarterly earnings on July 28th and saw an immediate jump in price only to fall with the market. Since 2009 the company's revenue and net income have posted gains at a remarkable rate with the most recent earnings report being the most impressive. The company witnessed its revenue increase by more than 60% year over year and has now beat expectations four straight quarters year over year. This company is trading with a price to earnings under 16 which is modest for a company with such upside and excitement. A price near $32 should be a good buy point, if you are interested in purchasing this stock. I believe the company's potential is among the top 3 within the industry of pharmaceuticals. The company expects to see continued growth making the stock very attractive at its current price.
Since this downtrend began I have spoke often about being an opportunist in this market. Each of these companies, along with many others, have posted an increase in earnings, have a bright future, and have made significant developments within their company during the last year. Yet all of these companies are trending down during a time when they should be trending higher. There are 100's of companies that are in similar situations. But I believe that these companies offer the best opportunity for immediate and long term growth when the market recovers. This downtrend is a result of panic, some loss should have been expected but not to this level. I am confident the markets will recover and that investors who buy stocks at current positions, or at some point during the day on Tuesday, will be rewarded substantially in the immediate future.