4 Bargain Stocks Set To Rebound

 |  Includes: BBY, GILD, HPQ, SPLS
by: Leonid Kanopka

Recently there have been stocks trading at or near their March 2009 lows. We all know what happened in March 2009, and the recent scare of another recession has pushed certain stocks back to the “dark days.” The markets have made a 70% turnaround, on average, since 2009, and I do not see why in the next few years these four stocks won't do the same.

The recent “cyclical” bad news has pushed these stocks to new lows and opened the door to great opportunities. The combination of bad market sentiment, strong fundamental data, and a clear vision for growth is an extremely profitable scenario. Below are 4 bargain stocks that will rebound:

Gilead Sciences, Inc (NASDAQ:GILD) is a biopharmaceutical company. The company focuses on the development and commercialization of human therapeutics for life-threatening diseases. The company has operations in North America, Europe and Asia Pacific. The current stock price is $41.49, with a 1-year analyst price rating of $47.96. This signals a 16% upside potential. The current price is 10% below the closing price of $45.43 in March 2009, but the fundamentals are incredibly strong. GILD is trading at an extreme bargain with a P/E of 12.45x and an EPS of $3.33.

This company has a lot of skepticism built in, which is why the price is so low. The company withstood pressure in 2009, and in 2010 took a big hit in share prices due to the fear of new legislation and worries about patent expiration. Despite skepticism, earnings continue to rise, due in part to a very lucrative HIV drug. The company's gross margin and day’s sales in inventory have been higher than its Subsector average for each of the past five years. GILD's current Forward PEG of 0.6 represents a 52% discount to its Biotechnology subsector average, and trailing P/E represents a 65% discount to the subsector average. I feel this company is heavily undervalued due to skepticism, and investors can benefit from this.

Staples, Inc (NASDAQ:SPLS) is an office products company. As of January 29, 2011, Staples served customers of all sizes in 26 countries throughout North America, Europe, Australia, South America, and Asia. The current market price is $14.66, with a 1-year analyst price target of $18.07. This represents a 23.26% upside potential. One reason I really like this company is the fact that is pays a dividend yield of 2.8%. Staples, like GILD, is trading near its March 2009 lows, yet its earnings continue to grow.

The enterprise value is $11.86B, compared to the underpriced market value of $10.39B. The company has earned $1.24 per share during the past four quarters, translating into a trailing P/E of about 12x, and is still on the rise. Despite its strong fundamentals Staples’ trailing P/E represents a 53% discount to its Specialty Retailers subsector average. Another reason Staples is on this list is because its International segment is generating positive returns and is expected to see continued improvement as the year progresses. This stock is a hidden gem this will definitely soar in the near future once the markets adjust.

Hewlett-Packard Company (NYSE:HPQ) is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors. The current market price is heavily discounted at $25.75 with a 1-year price target of $30.62. This represents an 18.91% upside potential, and this does not include its 1.9% dividend yield.

Hewlett-Packard recently announced it was getting out of the PC business (its biggest revenue generator). This news was not well received by the market, and shares fell to as little as $22 (March 2009 lows where around $26). Although this news was not taken very well at first, it has posed a perfect opportunity for investors. While the selloff makes sense on the surface, this is a case where the market may have overreacted, not realizing there's a flipside to this coin. The PC business was a very low-margin operation, and the top and bottom lines for it have been struggling for a while. As a result to the news HPQ's current forward PEG of 0.7 represents a 43% discount to its Computer Hardware subsector average, and trailing P/E of 5x represents a 73% discount to the subsector average. Also, according to the analysts, HPQ has a strong brand, a loyal customer base, and is likely the largest installed base of enterprise and consumer customers. I feel this stock has a huge growth potential at the current price.

Best Buy Co., Inc. (NYSE:BBY) is a multinational retailer of consumer electronics, home office products, entertainment products, appliances and related services. The current market price is $26.65 with a 1-year analyst price target of $29.95. This represents a 12.38% upside potential, not including its 2.4% dividend yield. The electronics retailer has already suggested holiday hiring will be modest this year, hinting at a modest expectation for holiday traffic. It's also considering the closure of a few stores in the U.K., and has opted to sell its Napster music service as well.

This company seems fraught with bad news and red flags, which have sent the stock from upwards of $44 to the current market price of $26. I feel the refocusing of the company is temporarily bad news, but in the long run will pose very lucrative. I love the fact that this stock is so low compared to its potential on speculation alone. Best Buy’s forward PEG of 0.8 represents a 13% discount to its 5-year average of 0.9, and trailing P/E of 7.8x represents a 68% discount to its specialty retailers subsector average. Another reason to take a closer look at Best Buy is because the slowdown in investment spending combined with better execution and strong product cycles in TV, gaming, and portable music could accelerate EPS growth. BBY is a great stock to consider at this heavily discounted price.

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