Are These 7 Big Decliners On Friday Showing Value Now?

by: Brian Gorban

As I recently discussed here, insider activity is often a strong indicator of where a stock is going. Another article I wrote discussed the strong indicators that options activity can show us investors. Finally, another place I like to look for potential new investments are the 52-week low list and/or big price percentage losers, as naturally those companies at times get hit excessively hard and give us the opportunity to buy dollar bills at fifty cents or less. Let's look:

  1. Eastman Kodak (EK) plunged over 50% on escalating bankruptcy fears related to its potential patent sale. As I wrote here a month ago, I've been long the stock with high premium call options written against shares. I feel there's still great value in the company. It started to really fall this past Monday when investors felt a $160 million draw from Kodak's credit line raised cash-flow concerns. Then on Friday, word came out that the company was considering bankruptcy. However, the press release seemed overblown as Eastman Kodak's representatives came out after the market close and said the company "has no intention of filing for bankruptcy." The stock jumped 35% after the bell to $1.05 and hit as high as $1.18 on heavy volume. Overall, there are analysts like Mark Kaufman of Rafferty Capital, who estimates the patent portfolio is worth $2.4 billion and the company is worth $9/share as a whole. Even Fitch, which downgraded Eastman Kodak's debt, said the company has a adjusted reorganization value of $1.4 billion, translating to $5/share. Either way, with the stock just over $1/share, I think this is a great speculative buy.

  2. Focus Media Holding (NASDAQ:FMCN) got slammed over 17% on Friday to a new 52-week low and looks to have some value at these levels. The Hong Kong advertising agency is trading under 11x P/E, 8.5x enterprise value/FCF, and almost $4.5/share in net cash with no debt. I think now it's a reasonably long term buy at its close of $16.83.

  3. Camelot Information Systems (NYSE:CIS) fell over 14% Friday and has definitely added value into the value category. The company trades at under a 7x P/E, .6x P/S, and amazingly 90% net cash and no debt. This is extremely cheap for any company, let alone one that is cash flow positive, so i think this is a great buy here at its Friday closing price of $2.68.

  4. Micron Technology (NASDAQ:MU) fell over 14% as well to a new 52-week low and valuations look compelling. Trading under an 8x P/E, .5x enterprise value/revenue, .7x P/B, and $800 million in net cash. I think this company is showing great value here at $5/share.

  5. Renren (NYSE:RENN) fell almost 13% as one of the many Chinese-based stocks getting hammered on Friday. Even though this company is over 60% in net cash with no debt, I don't see much value after that. Especially when I see it's trading at over 27x P/S and has lost over $65 million in net income over the last twelve months. I don't see value here even as the stock sits near its 52-week low.

  6. Home Inns & Hotels Management (NASDAQ:HMIN) fell almost 13% as well, joining the slew of Chinese stocks hitting new 52-week lows this past Friday. The hotel chain trades at 28x P/E, 2.6x P/B, and 2.3x P/S. I think the stock is still too expensive here, but if it were come down to a 25x P/E translating to $23/share, this well-run company is a buy.

  7. CF Industries (NYSE:CF) fell over 12% as this fertilizer maker got hit hard. Other fertilizers such as Potash (NYSE:POT) and Mosaic (NYSE:MOS) fell as well when the USDA showed that corn stockpiles grew 150 million more than expected. This company now trades at under 9x P/E, but with a 2x P/B and P/S and heavy debt load. This stock still seems a little rich for me, but at an 8x P/E, translating to $113, I'd be a buyer.

Disclosure: I am long EK.