9 Nasdaq 100 Stocks Approaching Undervalued Levels

by: New Low Observer

Below are nine of 30 Nasdaq 100 companies that are within 20% of their respective 52-week lows. The complete list of 30 stocks can be found here.

Symbol Name Trade P/E EPS (ttm) Yield P/B Pct from Yr Low
BMC BMC Software, Inc. 38.55 15.23 2.53 N/A 4.05 3.66%
FSLR First Solar, Inc. 53.77 9.17 5.87 N/A 1.23 5.70%
CTRP Ctrip.com 32.35 28.01 1.16 N/A 4.46 6.80%
QGEN Qiagen N.V. 13.39 24.35 0.55 N/A 1.17 7.38%
NFLX Netflix, Inc. 117.04 29.7 3.94 N/A 17.53 8.74%
ESRX Express Scripts, Inc. 39.14 16.03 2.44 N/A 10.26 9.67%
MYL Mylan Inc. 18.04 19.76 0.91 N/A 1.91 11.56%
TEVA Teva Pharmaceutical Industries 39.16 11.2 3.5 2.00% 1.45 11.89%
LIFE Life Technologies 39.66 20.41 1.94 N/A 1.49 12.35%

Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock is purchased from this list only after a considerable decline in the price and rigorous due diligence.

Watch List Summary

A stock that was on and off our radar in a flash was Akamai Technologies (NASDAQ:AKAM). Akamai Technologies was last on our Nasdaq 100 watch list August 12, 2011. Two months later, October 3, Akamai closed at a 1-year low of $18.65. There are many reasons for AKAM’s price falling to a new low. Among other things, AKAM is under considerable competitive pressure, which some investors believe that the company has been slow to react to. However, every time AKAM reaches a new low, rumors abound about whether or not it will get acquired, as was the case 2 years ago. We believe the such rumors in 2009 are what helped those previously negative on the company to reconsider the merits of Akamai’s business. Most recently it was rumored that Google (NASDAQ:GOOG) was considering AKAM, although such rumors were dispelled very quickly.

(Click charts to expand)

Although Akamai has a lot of cash, potential growth in foreign markets, generally lower rate of customer turnover, which could contribute to the company’s growth going forward, we believe it is worth considering Akamai from a Dow Theory perspective for any upside potential that might remain for the company. According to Dow Theory, so far the average price paid by investors, as opposed to speculators, is $36.45. This indicates the point which an investor over the last year considers to be the stock’s fair value. This implies that the stock, at maximum could gain nearly 52% in due time. However, taking into account Charles H. Dow’s claim that in a bear market, investors should only expect half of what would be considered “fair value” in a bull market, we think that in the next year Akamai could rise to the $30.15 level before faltering. We have acquired shares of Akamai with the expectation that the stock will decline by at least 50% at which point we will reconsider buying additional shares.

Watch List Performance Review

In our ongoing review of the Nasdaq 100 Watch List, we have taken the stocks from our list of October 23, 2009 (found here) and have checked their performance two years later. The companies on that list are provided below with the closing price for October 23, 2009. to October 21, 2011.

- - 2009 2011 change
SRCL Stericycle 53.17 84.04 58.06%
GILD Gilead 43.83 41.47 -5.38%
GENZ Genzyme 54.5 76.25 39.91%
CEPH Cephalon 54.02 81.49 50.85%
BIIB Biogen 43.81 108.84 148.44%
- - - Average change: 58.37%
- - - - -
^NDX Nasdaq 100 1735.63 2306.29 32.88%

This is a particularly fascinating performance review because of the high performance of the stocks compared with the Nasdaq 100 Index. On average, the stocks from the October 23, 2009 list exceeded the Nasdaq 100 Index by 25.49%. Two of the companies have already been acquired (CEPH and GENZ) while SRCL and BIIB continue to outperform the Nasdaq 100 Index by a wide margin. The only stock that is severely lagging behind the index is Gilead Sciences (NASDAQ:GILD) with a loss of -5.38% and a numbing -38.26% underperformance. Overall, we’re satisfied with the results of this watch list and encourage closer scrutiny of companies on our current list. There may be bargains to be had.

Disclosure: I am long AKAM.

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