Seeking Alpha
Profile| Send Message|
( followers)  

The recent market turmoil has produced the kinds of gyrations that make many investors dizzy but also throw up mouth-watering opportunities for investors willing and able to look through the panic.

We have screened for companies whose stock prices are off by more than one-third since the end of July, implying 50% upside in a potential return to prices paid by investors only two weeks ago. Here are several interesting potential opportunities:

M/I Homes (MHO) ($6.80 per share; MV $128 million; EV $460 million), based in Columbus, OH, has been building single-family homes in the U.S. since 1976. Since then, the company has delivered 78,000+ homes. It offers homestyles at base prices ranging from $85,000 to $1.3 million, with an average sales price of $247,000 in 2010.

M/I Homes is active primarily in certain Midwestern states (Ohio, Indiana and Illinois) as well as Florida, Texas, North Carolina, and Washington, D.C. Homes delivered increased 1% from 2,409 in 2009 to 2,434 in 2010, while revenue increased 8% in the period.

The Street expects M/I Homes to lose $1.14 per share in 2011 and earn $0.42 in 2012 (16x P/E). The company trades at 0.7x tangible book value of $184 million. The stock price has dropped 40% in the past couple of weeks, falling to a new 52-week low.

Novatel Wireless (NVTL) ($3.30 per share; MV $106 million; EV $48 million), based in San Diego, CA, provides wireless broadband access products, including mobile hotspots, USB modems, embedded PCI, and wireless PC-card modems. The company expanded the product portfolio to include asset-management solutions in late 2010 via the $78 million cash acquisition of Enfora.

Gross profit increased 9% from $250 million in 2009 to $273 million in 2010, while revenue remained roughly flat at $340 million in the same period. The Street expects Novatel Wireless to lose $0.90 per share in 2011. The company has $58 million of net cash (55% of market value) and $99 million of tangible book value. The stock price has dropped 36% since July 29, hitting a new 52-week low.

Beazer Homes (BZH) ($1.60 per share; MV $120 million; EV $1.3 billion), based in Atlanta, GA, is a top 10 U.S. single-family homebuilder with operations in 16 states. The company has delivered 120,000+ homes over the past decade. The number of home sales closed increased 8% from 4,196 in the fiscal year ended September 30, 2009 to 4,513 in FY10, while total revenue remained roughly flat at $1.0 billion in the period.

Analysts expect Beazer to lose $2.09 per share in FY11. The company trades at 0.5x tangible book value of $241 million. The stock price has dropped 46% in the past couple of weeks, falling to a 52-week low.

Leap Wireless (LEAP) ($7.40 per share; MV $580 million; EV $3.1 billion), based in San Diego, CA, provides prepaid wireless services in 35 U.S. states, targeting a young and somewhat lower-income customer base. The number of customers rose 11% from 5.0 million at the end of 2009 to 5.5 million at yearend 2010. Analysts expect Leap Wireless to lose $3.83 per share in 2011. The stock price has dropped 45% since the end of July.

Leap has been a long-time holding of noted value investors Mark Rachesky of MHR and Rehan Jaffer of H Partners. We would not be surprised if the recent steep share price drop in Leap and its comparable, MetroPCS (PCS), ultimately led to some type of strategic deal, potentially including the long-rumored merger of the two entities.

K-Swiss (KSWS) ($6.50 per share; MV $231 million; EV $155 million), based in Westlake Village, CA, develops and markets footwear under the K-Swiss, Palladium and Form Athletics brands. The vast majority of revenue still comes from the K-Swiss brand, which has enjoyed strong status in the tennis shoes market segment for a long time. The smaller Palladium all-terrain footwear brand has been growing revenue in recent years, while the Form Athletics mixed martial arts brand is quite new.

Non-U.S. sales of K-Swiss-branded footwear declined 19% from $110 million in 2009 to $89.7 million in 2010, while total revenue declined 10% to $217 million during the period. Analysts expect K-Swiss to lose $1.57 per share in 2011, followed by EPS of $0.01 and $0.85 (8x) over the next two years. The company has $76 million of net cash (33% of recent market value) and $209 million of tangible book value.

CEO Steven Nichols owns 21% of the company (valued at roughly $49 million), giving him a strong incentive to maximize shareholder value. The stock price has dropped 39% in the past couple of weeks, hitting a 52-week low.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 5 Intriguing Stocks Off More Than One-Third in Past Two Weeks