It is possible to buy an even hundred shares of quality companies for under $2,000, an amount far less than one share of Berkshire Hathaway (BRK.A). Today I will look at five low priced issues which all have received positive comments from analysts. While there are other stocks with positive analyst feedback, each of these stocks has traded on particularly high volume amid a recently rising stock price which indicates that investors are taking cues from analysts and buying shares. Investors with a smaller capital base should use their own due diligence to investigate these stocks in more detail.
Kinross Gold Corporation (KGC)
KGC has been trading on the NYSE at about $14.70 per share. Its narrow 52 week range is from $19.90 to $12.80. At KGC's current price, its market capitalization is $16.7 billion. Its current annual dividend is $0.12 for an annual yield of 0.80%.. Its trailing P/E ratio is 15.7, and its forward annual P/E is 11.
KGC is a miner and processor of precious metals, gold in particular. It therefore has ridden the wave of historically high gold prices to excellent profitability. Its trailing annual average profit margin on sales was over 27%. While not as strong as at industry leader Barrick Gold Corporation's (ABX) 31%, KGC's numbers are solid.
An investment in KGC is not quite the same as a direct investment in gold. Gold stocks tend historically to trail, by as much as two years, shifts in metal prices. Through 2010 as gold prices rose, KGC actually reached its 52 week low. As long as gold prices remain high, look for this disparity to correct itself . As KGC is trading at only 112% of book value, it is also an excellent value play at this level.
DR Horton, Inc. (DHI)
This homebuilder's stock was recently trading at approximately $11.60, near the midpoint of its narrow 52 week range of 13.50 to 8.03. Its market capitalization is roughly $3.7 billion. It is currently trading at a P/E ratio of over one thousand, as last year's earnings amounted to $0.01. DHI is paying a $0.15 annual dividend, for a current yield of 1.3%
Like many homebuilders, a long term view of DHI reveals it to be a classic boom and bust stock. More than most industries, home builders income is highly cyclical. Fortunes have been made by buying near the bottom of a market cycle and selling near the top after a run up of up to several hundred percent. Of course one wrong bet and those fortunes can be lost. One key is to pick the right company among homebuilders. Builders such as PulteGroup, Inc. (PHM) and KB Homes, Inc. (KBH), are in much the same financial situation as DHI. Speculative investors should certainly look more closely at DHI; the rest of us might need some proof that the building industry is actually turning around.
CBRE Group, Inc. (CBG)
CBG's stock price presently is around $19 per share, within its 52 week range of $29.88 to $12.30. It has a market capitalization of just over $6 billion. It has a current P/E ratio of 24.68. CBG is not paying a dividend at this time.
CBG recently released a highly positive report for its third quarter of 2011. Revenue for the quarter increased from the same quarter in 2010 from $1.23 billion to $1.53 billion. Income increased by 12% from a year earlier, to $0.20 per share. In response, on October 28, 2011 CBG's stock price rose by 12%, and the prices quoted above reflect that.
CBG has a worldwide presence in consulting on aspects of the commercial lending and development industries. Its principal publically traded competitor, Jones Lang Lasalle, Inc. (JLL) has similar margins, profit margins, and growth prospects. Clearly, commercial real estate is ahead of residential real estate, and CBG may well trend back to its 52 week high over the next six to twelve months. Further investigation is warranted.
Invesco, LTD. (IVZ)
IVZ shares are traded on the NYSE, and recently traded around $21, roughly midway between its 52 week range of $27.50 and $14.52. This eighty year old investment company is capitalized at $9.42 billion, and pays a trailing dividend of $0.49 for a yield of 2.4%. At current levels, it has a trailing P/E ratio of 13.88.
For the quarter ended September 30th, 2011, IVZ's earnings of $0.42 per share beat consensus analyst estimates of $0.40 cents. Comments discuss that IVZ is growing market share within the financial sector, and momentum is building. Particularly telling is that during the quarter, IVZ gained $2.2 billion of inflows, while analysts had expected as much as $7 billion in net outflows of assets under management. Given also that a share buyback program is in effect, it appears that absent a complete meltdown in equities markets, IVZ is worthy of interest to those looking for long term capital gains.
MGIC Investment Corporation (MTG)
This mortgage insurer's shares have recently been priced on the NYSE at about $2.70, near the low end of its 52 week range of $11.79 to $1.52. Its market capitalization is nearly $550 million, and it pays no dividend. It has posted losses each of the past several years, so P/E ratios are meaningless.
The most recent analyst to review the MTG did so, with a positive conclusion, in April, 2010. Since that time, the financial news for MTG has gone from bad to worse. For the just-concluded third quarter of 2011, MTG lost $0.88 per share. Its combined ratio is a shockingly distressing 184.6. Even worse, its combined risk to capital ratio at the end of the third quarter was 24:1. A ratio of 25.1:1 or worse, subjects an insurer to regulatory seizure. Such a seizure has already befallen competitor PMI Insurance, a division of PMI Group (PMI).
I would certainly steer clear of any commitment to MTG unless or until housing prices and foreclosure rates correct. By then, though, there may not be an MTG to invest in.