"Be fearful when others are greedy, and greedy when others are fearful." Those words by Warren Buffett are ones to live by for any value investor. The stocks below are trading within 5% of their 52-week lows, looking to rebound. While there are many stocks hovering near their lows, these are selling at significant discounts to fair value. Here is my actionable analysis on each stock:
Abercrombie & Fitch Co. (ANF) – Currently trading near its 52-week low of around $45, ANF is a slightly volatile stock with a beta of 1.64. Part of the reason for the low price is due to its disappointing third quarter results. There was a 3.6% decline in gross margin as well as concern in the company’s slowing business internationally. The company currently has a dividend of $0.70, which is a yield of 1.46%. With earnings per share of $2.21, the stock has a price to earnings ratio of 22.30. This is more than twice the industry average of 9.80 and relatively higher than the S&P 500 at 14.60.
Comparing ANF to its competitors American Eagle Outfitters, Inc. (AEO) and Gap Inc. (GPS), both have price to earnings less than ANF, with ratios of 16.22 and 10.50, respectively. In regard to profit, ANF reports a net income of $199.01 million compared to AEO at $168.16 million and leader GPS’ net income of $1.09 billion. Now that the worst is behind the company in regard to earnings, and the holiday season is approaching, ANF is a stock that could make a strong turnaround.
CME Group Inc. (CME) – Trading near the 52-week low of around $235, CME is another stock that could be a turnaround. The stock currently has a one year target price of $322.06, which would be a 26.9% increase from the low. CME does offer a dividend yield of 2.30%, or $5.60 annually. The company’s earnings per share of $18.86 gives the stock a price to earnings ratio of 13.13. This is slightly higher than industry at 10.5, but less than the S&P 500.
CBOE Holdings, Inc. (CBOE) and Nasdaq OMX Group Inc. (NDAQ) are direct competitors to CME in the industry. Both trail CME’s net income of $1.26 billion, with $136.07 million and $443.00 million, respectively. CBOE has the higher price to earnings ratio of 17.78, while NDAQ has the lowest price to earnings ratio of the three with 10.70.
The recent earnings reported by the company for the 3rd quarter is a sign that the stock price may turn around and start to rise. CME reported per share earnings of $4.74. This was ahead of the analyst estimates of $4.64 as well as being substantially higher than the year-ago quarter results of $3.66.
Forest Laboratories Inc. (FRX) – With a beta of 0.69, FRX is a stock less volatile than the market. The stock currently offers no dividend. With earnings per share of $4.05, FRX has a price to earnings ratio of 7.24. This is roughly 3 times lower than the industry of 23.3, making a case that this stock is quite undervalued. The price to book value also indicates the stock could be undervalued. FRX has a price to book value of 1.52, while the industry has a ratio of 6.87 and the S&P 500 with a ratio of 3.80.
Comparing FRX to competitors Eli Lilly & Co. (LLY) and Pfizer Inc. (PFE), FRX has the lowest net income of the three with $1.15 billion compared to $4.66 billion and $10.18 billion respectively. In the case of both competitors, the price to earnings ratios is also higher at 8.82 and 13.56. Analysts estimate the stock will reach a mean target price of $35.82. This would be a 18.5% increase from the 52-week low of $29.18. Based on the estimates, this stock is one that looks like it could make a strong turnaround.
Kellogg Co. (K) – K has the highest dividend on this list, with a yield of 3.48% or $1.72 annually. The stock is also the least volatile on the list with a beta of 0.46. With the current earnings per share of around $3.25, K has a price to earnings ratio of 15.25. This ratio is slightly less than the industry at 17.7 as well as the S&P 500. The price to book ratio, however, is higher than both, with a ratio of 7.74 compared to 3.92 and 3.80, respectively.
K is very similar in earnings to competitor General Mills Inc. (GIS). Net income is very comparable with K’s $1.19 billion against GIS’ net income of $1.73 billion. In addition, price to earnings is comparable with GIS currently having a ratio of 14.78. Although K has recently posted disappointed 3rd quarter results, the company has proved resilient in a challenging market. Over time, this stock could very well turn around. Analysts predict the stock will make a rebound, with a mean target price of $54.44.
Time Warner Cable Inc. (TWC) – TWC is another stock with low volatility, as it has a beta of 0.70. The dividend of the stock is $1.92, which is a yield of 3.17%. The earnings per share of $4.33 give the stock a price to earnings ratio of 13.96. The company’s ratio is slightly lower than the industry which has a ratio of 15.3. The price to book value of TWC at 2.54 is notably lower than the industry’s at 7.59. One thing bargain investors look for when scanning for a possible stock is when insiders are purchasing it. Currently, TWC is trading near its 52-week low of around $60. This price is lower than the purchase price TWC’s Director, Peter R Haje, bought the shares for at $62.99. With analysts estimating the stock to reach a mean target price of $82.42, the stock could be a good investment for any investor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.