Every year around this time, I seek out companies with solid management and growth prospects that have stocks trading near 52 week lows. The strategy of buying beaten-down stocks just a few weeks before the end of the year often results in solid gains because stocks that many investors are underwater on often are sold down even more for tax loss purposes. Sometimes after holding a stock that has dropped in value, investors want to sell even if it's not a great time to do so. This occurs out of pure frustration, a desire to cut losses, and a desire to harvest tax losses in order to minimize gains on other stocks. The tax loss selling can exacerbate the declines in an already oversold, undervalued stock at this time of year and that can be an opportunity. Here are a few stocks that have had a tough year but could rebound into 2012.
ATP Oil and Gas Corp. (ATPG) is trading at $7.30. ATPG is an independent oil and gas company, based in Texas. These shares have traded in a range between $5.53 to $21.40 in the last 52 weeks. The 50-day moving average is $8.69 and the 200-day moving is $13.88. Earnings estimates for ATPG are expected to go from a loss in 2011 to a profit of $1.49 per share in 2012. The higher revenues and margins for 2012 are due to higher production coming from oil wells in the Gulf of Mexico. Insiders have been buying significant amounts of ATPG stock in recent weeks. In mid-November, one director bought 100,000 shares and the CEO bought 65,000 shares. This stock is heavily shorted and any good news could cause a major rally. With the stock trading at about 65% below the 2011 highs, I expect a sharp rebound in January which will be fueld by the end of tax loss selling and short covering.
Ford Motor Co. (F) shares are trading at $10.90. Ford is a global leader in auto and truck manufacturing. The 50-day moving average is about $10.89 and the 200-day moving average is about $12.78. Ford shares hit a 52 week high of $18.97 and a low of $9.05 earlier this year. Earnings estimates for Ford are $1.87 per share in 2011 and $1.62 for 2012, which puts the PE ratio at about 5. The European debt crisis is slowing down demand for cars in Europe and investors are concerned that a double-dip recession could occur. However, those fears might be overblown. Ford has made great progress in terms of the balance sheet, and as that continues, a dividend could be initiated. With the stock down trading about 40% below the 2011 high, it could rebound in January.
Kronos Worldwide (KRO) shares are trading at $19.71. Kronos is a leading maker of specialty chemicals and is based in Texas. These shares have traded in a range between $14.16 to $34.50 in the last 52 weeks. The 50-day moving average is $19.57 and the 200-day moving average is $24.89. Earnings estimates indicate a profit of $2.82 per share for 2011 and $3.44 for 2012. KRO pays a dividend of 60 cents per share which is equivalent to a 3% yield. Insiders have been buying this stock recently. With a solid yield and a low PE ratio, this stock looks undervalued and set for a 2012 rebound.
Hartford Financial (HIG) shares are trading at $17.91. HIG is a leading insurance company. The 50-day moving average is $17.46 and the 200-day moving average is $22.52. This stock has been impacted by storm losses, legal expenses, and a major market correction, but this has created much lower prices and a great long-term buying opportunity. Earnings estimates are about $2.05 for 2011, and are expected to jump to $3.51 per share in 2012. Hartford is extremely undervalued and that could lead to out-performance in the future. HIG pays a dividend of about 40 cents per share, which is equivalent to a yield of about 2.2%. This stock is trading well below book value which is stated at $49.89. The 52 week high is $31.08, so plenty of investors have losses in this stock. That means tax loss selling is likely now, followed by a rebound in January.
Vale S.A. (VALE) is trading around $23.50. Vale is a leading mining company, and is based in Brazil. The 50-day moving average is $24.17 and the 200-day moving average is $28.86. These shares have traded in a range between $21.14 to $37.24 in the last 52 weeks. Earnings estimates for VALE are about $5.03 per share in 2011 and $4.67 for 2012. VALE pays a dividend of 6 cents per share which is equivalent to a yield of .2%. This stock was trading around $30 in August and has since plunged to current levels. This stock could remain weak until tax loss selling ends, but it has plenty of potential to recover in 2012.
General Motors (GM) shares are trading at $21.28. GM is a leading automaker. The 50-day moving average is $22.58 and the 200-day moving average is $27.50. Earnings estimates for GM are just over $4.40 per share in 2011 and $4.61 for 2012, so the PE ratio is only about 5. The fear for some investors is that the U.S. and the global economy is about to fall into another major recession. A significant global economic downturn would impact GM, but the stock seems to be pricing in a lot of bad news and fear already with it trading for about 5 times earnings. This stock traded as high as $39.48 in the last 12 months, and many investors have losses in GM shares. This makes it a strong candidate for gains in early 2012.
Green Mountain Coffee Roasters, Inc. (GMCR) shares are trading at $56.32. GMCR provides specialty coffee products. The shares have traded in a range between $31.21 to $115.98 in the past 52 weeks. The 50-day moving average is $71.09 and the 200-day moving average is $77.66. Earnings estimates for GMCR are $2.59 per share in 2011, and $3.64 for 2012. Green Mountain was a favorite stock for momentum traders and it clearly became overvalued. Recently the stock has dropped sharply due to concerns over accounting and other issues. It has become a battleground stock with shorts and longs showing major differences in their beliefs. I don't think battleground stocks are worth the risk in most cases, but it could be a good short term trade for a January rebound.
The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.