The stock market correction has been fierce and swift in certain stocks. Many of them are trading for half or less of their recent highs. Even though the data has not officially confirmed a recession, many stocks are already priced as if we are in a major recession. I have to agree that the confidence of most consumers and business owners has probably been sharply reduced in the past few weeks, due to the mishandling of the debt ceiling debate and other factors. However, there are some positives that could counter recent weakness, such as a major drop in the price of oil, which would 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. 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 of most stocks. The one wild card to watch out for is how the debt situation in Europe plays out. Here are a number of industry-leading, blue chip stocks that have dropped way below where they were a few weeks ago and are now priced at bargain levels:
Caterpillar (NYSE:CAT) is trading at $83.96. These shares have a 52-week range of $70.37 to $116.55 The 50-day moving average is $95.77 and the 200-day moving average is $98.95. Estimates for CAT are about $7.19 per share in 2011 and $9.34 for 2012. Book value is stated at $20.75 per share. CAT pays a dividend of $1.84 per share, which is equivalent to a yield of 2.2%. Since this company manufactures economically sensitive industrial equipment, this stock will trade with the global economy. Caterpillar is solid and has a good future due to growing agricultural demand. This stock was trading for about $112 per share just a few weeks ago, and could rebound sharply if the economic fears subside.
Royal Caribbean Cruises (NYSE:RCL) shares are trading at $23.66. RCL is a major cruise line company based in Miami. The 50-day moving average is $29.69 and the 200-day moving average is $38.92. Earnings estimates for RCL are for a profit of about $2.89 per share in 2011 and $3.37 in 2012. RCL pays a dividend of 10 cents per share, which is equivalent to a yield of 0.4%. This stock was trading around $38 per share in July and has almost dropped in half, in a matter of weeks. Bookings may soften in the coming weeks, but much lower fuel prices may compensate for that.
Whirlpool Corp. (NYSE:WHR) shares are trading at $52.54. Whirlpool is a leading maker of appliances. The 50-day moving average is about $66.45 and the 200-day moving average is about $78.24. These shares have traded in a 52 week range between $51.91 and $92.28. Earnings estimates for WHR are about $11.21 per share in 2011 and $8.43 for 2012. WHR pays a dividend of $2 per share, which is equivalent to a yield of 3.8%.
Goodyear Tire (NASDAQ:GT) shares are trading at $10.50. Goodyear is a major tire manufacturer. These shares have a relative strength index of about 31, which indicates the shares are oversold. The 52-week range is $9.10 to $18.83. The 50-day moving average is $15.41 and the 200-day moving average is $14.22. Estimates for GT are about $1.60 per share in 2011 and $2.26 for 2012. Lower oil prices will help boost profit margins for Goodyear, and tires need to be replaced sooner or later, so any recession can only slightly delay the inevitable.
Gannett Incorporated (NYSE:GCI) is trading around $9.84. Gannett owns several major newspapers and is based in Virginia. The 50-day moving average is $11.86 and the 200-day moving average is $14.15. These shares have traded in a range between $9.45 to $18.93 in the last 52 weeks. Earnings estimates for GCI are about $5.90 per share in 2011 and $6.13 for 2012. GCI pays a dividend of 32 cents per share which is equivalent to a yield of 3.3%. This stock was trading around $14 in July and has since plunged to current levels.
Freeport McMoran Cooper & Gold (NYSE:FCX) shares are trading at $41.99. Freeport is a leading gold, copper and silver mining company. The 50-day moving average is about $49.24 and the 200-day moving average is about $51.60. These shares have traded in a 52-week range between $38.90 and $61.35. Earnings estimates for FCX are about $5.90 per share in 2011 and $6.13 for 2012. FCX pays a dividend of $1.40 per share, which is equivalent to a yield of 2.6%. This stock was trading around $56 in July and has since plunged to current levels. If we see only a soft patch of economic data or a "normal" recession, this stock could be too cheap now.
Data sourced from Yahoo Finance and stockcharts.com. The information and data are 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 have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.