By Larry Gellar
It’s tough to find good stocks these days, but one important criterion should be a positive return on equity. These 5 stocks have that quality, and many have fluctuated quite a bit in the recent market turmoil. That means now could be a good time to buy -- while they’re still beaten down unnecessarily. Chevron and Vale are good plays for natural resources, whereas Broadcom, AMD, and Nokia are more technology-related. Let’s seen what’s been happening with these 5 stocks lately:
Chevron Corporation (CVX) has been volatile the past few months, as the price of oil continues to waver. Meanwhile, a Brazilian newspaper is reporting that Petrobas (PBR), the state-owned oil company in Brazil, actually spilled twice the oil that Chevron did last year. This comes as a surprise to many, seeing as Chevron’s spill at its Frade play has gotten quite a bit of attention. The recent spill doesn’t mean Chevron is backing down from this region though. In fact, here’s what Chevron’s head of Latin American and African operations Ali Moshiri had to say:
We plan to continue participating in new auctions for oil exploration blocks in Brazil, if there is creation of value and benefits.
As for consequences of the oil spill, Chevron is looking at hefty fines that will come from multiple parts of Brazil’s government. Important competitors for Chevron include BP (BP) and Exxon Mobil (XOM). Chevron is in the middle for price to earnings and price to sales ratios but has the lowest price/earnings to growth ratio.
It also boasts the best margins – those numbers are 32.09% gross and 16.17% operating. As for cash flows, $5.344 billion came in during 2010 and $169 million came in during the 9 months after that. Cash inflow has decreased primarily due to investing and financing activities.
Broadcom Corp. (BRCM) has been in quite a slump lately, although a new debt offering should help the company to reach its goals. $500 million of senior notes are being put out, and it is expected that the money will be used to fund its acquisition of NetLogic (NETL), amongst other things.
Financially, Broadcom has performed well with sales growing in a variety of segments and the bottom line doing well too. The Mobile and Wireless division is doing great in particular as companies like Samsung (OTC:SSNLF) continue to demand Broadcom’s products. In fact, a new deal between Broadcom and Samsung has many investors excited. Here’s what one of Broadcom’s top executive had to say about it:
The GALAXY Note is yet another innovative product from technology leader Samsung, and Broadcom is pleased that our newest GNSS solution paves the way for a better location experience with this device.
Important competitors for Broadcom include Infineon Technologies (OTCQX:IFNNY), Qualcomm (QCOM), and Texas Instruments (TXN). Broadcom has the lowest price/earnings to growth ratio, although price to earnings and price to sales ratios are higher than average. As for margins, Broadcom is a bit below average – those numbers are 49.71% gross and 12.65% operating.
Vale S.A. (VALE) has been volatile in the past quarter, and a new report says that Vale will invest approximately $19 billion in the year 2012. That’s significantly less than their investment expenditure for 2011, although capital expenditure isn’t expected to change very much from this year. Vale is also in the middle of changing its management structure significantly. Murilo Ferreira will now be the chief financial officer, and the plan is for all of the top executives to have a say in many aspects of the company’s business.
Meanwhile, investors contemplating Vale should definitely take a look at this Seeking Alpha article. The article explains many of the risks involved with Vale, including exposure to China and other aspects of the global economy that might not go perfectly.
Important competitors for Vale include BHP Billiton (BHP) and Cliffs Natural Resources (CLF). Vale has the highest price/earnings to growth, although price to earnings and price to sales ratios are closer to average. Margins are pretty good for Vale – those numbers are 61.35% gross and 50.95% operating, respectively. I expect a higher share price given its persistent profitability and current valuation.
Advanced Micro Devices, Inc. (AMD) has been volatile in recent months, although investors should definitely be excited about a new plan that will introduce an AMD line of memory. Here’s what Matt Skynner, one of AMD’s vice presidents, had to say:
… Adding system memory to our product line was a clear opportunity for us. This move provides our partners and end-users with a trusted brand synonymous with quality -- we can help ensure performance and reliability with AMD Memory.
On the other hand, AMD might be having some problems with selling its graphics cards. Specifically, rumors abound that AMD might be losing some of its business with Apple (AAPL), and more details can be found here. The real story originates from this link though, and it seems that Apple might be interested in working with Nvidia. Apple hasn’t always been happy with AMD’s role as a supplier, and it could be making a change.
Important competitors for AMD include Intel (INTC), IBM (IBM), and Nvidia (NVDA). Those stocks are more expensive using price to earnings and price to sales ratios although AMD’s price/earnings to growth ratio is about average. AMD has been lagging in the margins department though – those numbers are 44.67% gross and 6.62% operating.
Nokia Corporation (NOK) stock has had quite a bit of volatility in the past quarter, although stabilization could be on the way as Nokia continues to work with Microsoft (MSFT) to release more Windows phones. Because Sprint Nextel (S) is now providing service to iPhones, focusing on Windows phones made by companies such as Nokia could be a good way for AT&T (T) and Verizon (VZ) to re-capture some lost market. Additionally, Windows phones are seen by some analysts as better suited to the business market as opposed to the consumer market that Apple panders to.
The Lumia is one Nokia phone in particular that investors should keep an eye on. In other news, Nokia is pending approval to take its shares off the Frankfurt Stock Exchange. That leaves Helsinki and New York as the only two places that Nokia shares will be traded.
Important competitors for Nokia include LM Ericsson (ERIC) and Motorola Mobility (MMI). Compared to other players in the communication equipment industry, Nokia has a high price to earnings raito, an average price/earnings to growth ratio, and a low price to sales ratio. Its margins are at about the middle of the pack, with gross margin at 29.82% and operating margin at 2.50%.