The stock market has seen a significant correction in the past two weeks over concerns about the economy, global debt levels and elevated levels of anxiety that was created by the handling of the debt ceiling issues. It might be true that the global economy is in a soft patch, maybe even a recession if consumer confidence isn't restored quickly. However, there are some positives such as a major drop in the price of oil which will give consumers more disposable income and ability to pay loans. Also, stock prices are much lower and that is creating a great opportunity for anyone who realizes that even if the economy is in a recession, they often only last for one or two quarters. Furthermore, with the huge drop many stocks have seen, they are already pricing in a meaningful slowdown. If the negative headlines fade in the next few weeks and cash rich corporations continue to report solid profits and buyout deals, it could quickly lift stock prices in most stocks. Here are a number of stocks that have dropped way below where they were a few weeks ago and are now priced at bargain levels whether or not the global economy slows:
Genworth Financial, Inc. (GNW) has pulled back sharply and is trading at $5.78. The relative strength index is about 29 which indicates these shares are oversold. These shares have fallen, from a 52 week high of $16.10 and just today made a new 52 week low of $6.53. The 50 day moving average is $9.38 and the 200 day moving average is $11.83, so these shares are trading well below key support levels. GNW has earnings estimates of about 98 cents per share for 2011, and $1.61 for 2012. GNW warned on earnings and raised concerns over continued mortgage insurance losses.
KB Home (KBH) shares are trading at $6.22. KB Home is a leading home builder. The 50 day moving average is $9.81 and the 200 day moving average is $11.91. Book value is $5.76 per share. Earnings estimates indicate a loss for 2011 and small profit of about 10 cents for 2012. KB Home has been losing money recently and continued weakness in the economy will further delay a recovery in profits for this company. This stock probably is getting close to a bottom now that it is near book value.
MGIC Investment Corp. (MTG) is trading around $2.06. MGIC is a surety and title insurance company and is based in Wisconsin. The 50 day moving average is $5.44 and the 200 day moving average is $8.11. These shares have traded in a range between $1.87 to $11.79 in the last 52 weeks. Earnings estimates for MTG are for a loss in 2011 and profit of 25 cents in 2012. 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 priced for a disaster which has not yet occurred.
Accuride Corp. (ACW) is trading around $7.32. Accuride is a manufacturer of commercial vehicle parts. The 50 day moving average is $12.07 and the 200 day moving average is $13.42. These shares have traded in a range between $7 to $16.34 in the last 52 weeks. Earnings estimates for ACW are 47 cents per share in 2011 and $1.37 for 2012.
Central European Distribution Corp. (CEDC) shares are trading at $5.54. CEDC is a leading beverage distribution company, based in Pennsylvania. The 50 day moving average is $10.57 and the 200 day moving average is $16.78. Earnings estimates for CEDC are 80 cents per share in 2011 and $1.23 for 2012. The 52 week range is $5.30 to $28.08. Book value is stated at $23.83. This company had the misfortune of reporting weaker than expected results when the market was in free fall and it resulted in a sharp sell-off. At about 4 times earnings and trading for a fraction of book value, this is one of the cheapest stocks in the market and I expect the sharp drop to be followed by a sharp rebound soon.
Brown Shoe Co., (BWS) shares are trading around $7.73. Brown Shoe is a leading wholesaler and retailer of shoes, and is based in Missouri. These shares have traded in a range between $7.34 to $15.77 in the last 52 weeks. The 50 day moving average is $10.03 and the 200 day moving average is $12.16. Brown Shoe is estimated to earn about $1.16 per share in 2011, and $1.47 for 2012. These shares appear to be a bargain for only 6 times 2012 earnings. Another plus is that BWS pays a 28 cent per year dividend, which is equivalent to a 3.6% yield.
Ford Motor Co. (F) shares are trading at $10.41. These shares have a relative strength index of about 29 which indicates the shares are oversold. The 50 day moving average is about $13 and the 200 day moving average is about $15.12, so these shares are trading well below major support levels. Earnings estimates for F are $1.90 per share in 2011 and $1.98 for 2012 which puts the PE ratio at only 6. These shares are very cheap on a PE ratio basis and with the recent drop in the stock price, they could be already priced for recession.
The data is sourced from Yahoo Finance and Insidercow.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 only.
Disclosure: I am long CEDC. I may buy all of these stocks soon.
