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. I have researched a number of Internet companies that fit the profile for a strong surge in January. Here are a few stocks that have had a tough year, but could rebound into 2012.
Travelzoo, Inc. (TZOO) shares are trading at $26.07. TZOO is a Internet company that offers travel and other deals online. The shares have traded in a range between $20.68 to $103.80 in the past 52 weeks. The 50-day moving average is $28.01, and the 200-day moving average is $50.27. Earnings estimates for TZOO are $1.38 per share in 2011 and $1.72 for 2012. Travelzoo offers special deals online that are similar to the Groupon.com business model. Travelzoo.com was a high-flyer, but has since dropped to more reasonable valuations. With the stock trading for about one-third of the 52 week high, it's probably seeing plenty of tax-loss selling now which will lead to a January rebound.
Vistaprint (VPRT) shares are trading at $33.37. Vistaprint offers online printing services and products for businesses. The shares currently trade above the 50-day moving average of $31.39 and below the 200-day moving average of $40.44. These shares have traded in a 52 week range between $23.89 and $56.25. Earnings estimates for VPRT are about $1.80 per share and $2.25 for 2012. Vistaprint continues to take away market share from smaller companies, and there is no reason why this trend won't continue to boost results in the future. This stock is trading well below the 52 week high and should see gains once tax-loss selling season ends.
Acme Packet, Inc. (APKT) shares are trading at $34.41. Acme provides Internet solutions for businesses. The shares currently trade well below the 50-day moving average of $37.67 and the 200-day moving average of $58.22. These shares have traded in a 52 week range between $29.25 and $84.50. Earnings estimates for APKT are about $1.14 per share for 2011 and $1.46 for 2012. APKT shares traded for more than double the current price earlier this year, so this makes it a likely candidate for tax-loss selling and a subsequent rebound.
E-Commerce China Dangdang (DANG) shares are trading around $4.70. Dangdang is based in China and is often likened to be the Amazon.com of China. These shares have fallen from a 52 week high of $36.40. The 50-day moving average is $5.48 and the 200-day moving average is $13.04. DANG shares have been cut in half since the market started to correct in early August, but the potential of this company is still just as strong. The economy in China poised to grow much faster than the rest of the world for many decades; this stock has explosive potential. The cash on the balance sheet of about $257 million is equivalent to around $3.25 per share, so the stock is trading just a couple bucks over cash value. When expectations for DANG were high (shortly after the initial public offering) the stock was trading for about $36. Now expectations are extremely low, and the stock is a bargain around $6 per share. This stock is one my top picks for a January rebound which will be fueled by short covering and the end of tax-loss selling.
Renren, Inc. (RENN) is trading at $3.70. Renren is a social networking company in China. Many call it the "Facebook" of China. The 52 week high is $24, so this stock has been beaten-down at the end of 2011. RENN has a market capitalization of about $1.44 billion and a enterprise value of about $231 million due to the cash on the balance sheet of roughly $1.2 billion. The cash on the balance sheet of about $1.2 billion is equivalent to around $3.05 per share, so the stock is trading just barely over cash value. Reports have put the value of Facebook at around $75 to $100 billion, and that makes buying RENN with a enterprise value of about $231 million a real bargain. The largest social networking site in China (the most populous nation in the world) has to be worth more than 1% of Facebook, and this stock should see a boost when Facebook goes public. With this stock trading at less than 1/6th of the 52 week high, I believe this stock is seeing serious levels of tax-loss selling, which should be followed by a big January rebound.
Perfect World Co., Ltd. (PWRD) is trading at $11.70. PWRD is one of the leading online gaming companies in China. These shares have fallen from a 52 week high of $29.10 and just recently hit a 52 week low. The 50-day moving average is $12.18 and the 200-day moving average is $18.89. PWRD earnings estimates are about $2.86 per share in 2011 and $3.02 for 2012. This puts the PE ratio at about 4, which is very low for one of the leading online gaming companies. The balance sheet is extremely strong, with about $6.77 per share in cash and no long-term debt. With this stock trading for about 1/3rd of the 52 week high, it has been beaten-down and now has strong prospects for a rebound into 2012.
The data is sourced from Yahoo Finance and stockcharts.com. 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.