The recent market plunge has turned many stocks into bargains. With only a few weeks left before the end of the year, it makes sense to start buying beaten-down stocks. Many investors strategically buy depressed stocks at this time of the year because they tend to get unfairly punished due to tax-loss selling. With investors dumping stocks they have losses in regardless of price, it's easy to see why these same stocks often rebound in January when tax -loss selling is over. Some of these stocks are trading for even less than book value. When valuations get that low, there is already a lot of bad news priced into these stocks. Book value is one of the ways value investors evaluate stocks before making an investment. The book value (also sometimes called "net asset value") is considered to be the total value of the company's assets that a shareholder would receive if the company was liquidated. All of these stocks have dropped in value lately and might be offering a buying opportunity for long term investors and for those hoping to play the "January Effect" rebound. Here are a few companies that are trading below $6 per share and could be poised to double in 2012:
Genworth Financial, Inc. (GNW) is a leading insurance and financial services company. Genworth has been impacted by losses with mortgage insurance and this will continue to weigh on results, however, the worst might be priced in by now with the stock trading at about 4 times 2012 earnings and for only a fraction of book value. Genworth recently announced earnings of 21 cents per share and this beat analyst estimates. The stock rallied after those good results but the market correction has put pressure back on the stock.
Here are some key points for GNW:
- Current share price: $5.35
- The 52 week range is $4.80 to $14.77
- Earnings estimates for 2011: 45 cents per share
- Earnings estimates for 2012: $1.27 per share
- Annual dividend: None
- Book value: $33.15 per share
MGIC Investment Corporation (MTG) is a financial services company offering mortgage insurance. The housing crisis has had a very negative impact on the financial results at this company and the shares have dropped by about 50% in the past couple of months. Insiders seem to think the stock is a bargain as they have been buying in significant amounts, which you can see here. This stock is probably one of the best candidates for a January rebound.
Here are some key points for MTG:
- Current share price: $2.40
- The 52 week range is $1.51 to $11.79
- Earnings estimates for 2011: a loss of $1.98 per share
- Earnings estimates for 2012: a profit of 49 cents per share
- Annual dividend: None
- Book value: $6.90 per share
Phoenix Companies, Inc. (PNX) offers annuities and life insurance products in the United States. This company is facing some challenges such as slow sales but it has a book value of nearly 6 times the current stock price. This is a higher risk, higher reward stock. It's possible a larger insurance company could have an interest in buying Phoenix in the future. In August, a director purchased 40,000 shares, which indicates the stock is probably undervalued. See the insider buying here.
Here are some key points for PNX:
- Current share price: $1.36
- The 52 week range is 97 cents to $2.86
- Earnings estimates for 2011: 44 cents per share
- Earnings estimates for 2012: 46 cents per share
- Book value: $10.67 per share
Bank of America (BAC) has been in decline due to concerns about new regulations, lawsuits, liabilities from the mortgage lender Countrywide, and more. However, BofA has been making tough choices and has taken steps for a turnaround including raising capital, and announcing new fees to boost profits. A number of investors believe BofA shares could double in the next year or so. Some very successful investors like Warren Buffet and Bruce Berkowitz of Fairholme Funds have invested in BofA, and believe that the stock has plenty of upside. Tax-loss selling is probably unfairly punishing this stock now and it rarely pays to bet against Warren Buffett.
Here are some key points for BAC:
- Current share price: $5.14
- The 52 week range is $5.13 to $15.31
- Earnings estimates for 2011: 2 cents per share
- Earnings estimates for 2012: 98 cents per share
- Annual dividend: 4 cents per share which yields .7%
- Book value: $20.80
Synovus Financial Corp. (SNV) is a regional bank with operations in Georgia, Alabama, South Carolina, Florida, and Tennessee. This stock was trading in the $2 range just a couple of months ago. Synovus can rebound back over $2 in time, especially as it has been considered to be a takeover target for a larger bank. If this stock trades back around book value, it would just about double from current levels. However, it is a bank, so I would probably wait for a dip before buying.
Here are some key points for SNV:
- Current share price: $1.44
- The 52 week range is 94 cents to $2.99
- Earnings estimates for 2011: a loss of 17 cents per share
- Earnings estimates for 2012: a profit of 14 cents per share
- Annual dividend: 4 cents per share which yields 2.6%
- Book value: $2.40 per share
Catalyst Pharmaceutical Partners Inc. (CPRX) is a biotechnology company with two products in development, including CPP-109 (vigabatrin), for the treatment of cocaine addiction, which has been granted fast track status by the U.S. Food & Drug Administration (FDA) for the treatment of cocaine addiction. Catalyst is also developing CPP-115 for drug addiction, and epilepsy. The company just recently announced a "stockholder rights plan" which states: "The Plan is designed to provide adequate time for the Board of Directors and the stockholders to assess an unsolicited takeover bid for the Company, to provide the Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a takeover bid is made..." Read more on that here. With a number of biotech companies receiving buyout offers this year, it's understandable why Catalyst is aiming to defend its high potential pipeline against a possible buyout offer based on a currently very cheap valuation. In January, I won't be surprised to see this stock trade around $1.40 plus, which is where it was recently.
Here are some key points for CPRX:
- Current share price: $1.04
- The 52 week range is $.89 to $2.25
- Earnings estimates for 2011: loss of 28 cents per share
- Earnings estimates for 2012: loss of 28 cents per share
- Annual dividend: none
- Book value: 18 cents
Vantage Drilling Company (VTG) offers offshore contract drilling services to oil and natural gas companies. The Vantage fleet includes four ultra-premium jackup rigs, three ultra-deepwater drillships, and two deepwater semi-submersibles. This is a small company compared to many other drillers and it is relatively new. This stock has dropped significantly in the past couple of weeks, which is probably due in part to tax loss selling. I think this stock is likely to rebound sharply in January.
Here are some key points for VTG:
- Current share price: $1.05
- The 52 week range is 97 cents to $2.26
- Earnings estimates for 2011: a loss of 16 cents per share
- Earnings estimates for 2012: a loss of 3 cents per share
- Book value: $2.42 per share
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.