Some bargain merchandise is available at your local store, but the best bargains might be select stocks right now. We are nearing the last trading days of 2011 and unless something disastrous occurs in Europe in the next two weeks, this could be an ideal time to buy some cheap stocks for a probable "Santa Claus Rally."
A recent article states that "If the Santa Claus rally is real, the facts should support it, and according to Bespoke Investment Group, they do. Going back to 1990, December has seen average returns of 2.02% with positive returns 81% of the time. In the past 100 years, the average December return is 1.39% with positive returns 73% of the time."
All of stocks below are trading well below their 52-week highs. The last week of December trading is usually very light, and most investors who were going to sell badly beaten-down stocks to harvest tax losses have already done so. The absence of tax loss selling can reduce the availability of cheap shares, and this often leads to much higher stock prices. Here are a few stocks that could see Santa Claus Rally gains that just might be large enough to pay for your holiday gifts and more into 2012:
Callon Petroleum (CPE) is an oil and gas company with projects in the Gulf of Mexico, Louisiana, and Texas. These shares have traded in a range between $3.02 to $9.36 in the last 52 weeks. The 50-day moving average is $4.73 and the 200-day moving average is $6.02. CPE is estimated to earn 76 cents per share in 2011 and 71 cents in 2012. Just recently, Callon reported better than expected earnings and guidance which sent the stock up to nearly $6; however, the weak markets have dragged the stock lower and are giving us a great buying opportunity now. This week, Canaccord started Callon shares with a buy rating and set a $7.50 price target.
Ford Motor Co. (F) is a global leader in auto and truck manufacturing. The 50-day moving average is about $11.04 and the 200-day moving average is about $12.61. 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 $1.61 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 a dividend was just initiated. With the stock down trading about 40% below the 2011 highs, it could rebound in 2012.
United States Steel Corp (X) is a leading maker of steel products. These shares have traded in a range between $18.85 to $64.03 in the past 52 weeks. The 50-day moving average is $25.13 and the 200-day moving average is $37.39. X is estimated to earn about 4 cents per share in 2011 and $2.55 in 2012. X pays a dividend of 20 cents per share which is equivalent to a .8% yield. The PE ratio and other valuation metrics indicate these shares are cheap. I think it makes sense to start buying now, and more heavily on any further weakness.
Cliffs Natural Resources (CLF) is an iron ore, coal and natural resources company. These shares have traded in a range between $47.31 to $102.84 in the last 52 weeks. The 50-day moving average is $65.40 and the 200-day moving average is $80.23. Cliffs pays a dividend of $1.12 per share which is equivalent to a yield of 1.7%. CLF is estimated to earn $13.38 per share in 2011 and $14.90 in 2012. I would buy this stock on any dips. In terms of PE ratios, this appears to be one of the cheapest stocks in the market.
Caterpillar (CAT) is a leading maker of heavy machinery. These shares have a 52-week range of $67.54 and $116.55 The 50-day moving average is $95.77 and the 200-day moving average is $98.95. Estimates for CAT are about $6.79 per share in 2011 and $9.03 for 2012. CAT pays a dividend of $1.84 per share, which is equivalent to a yield of 2%. Caterpillar is a solid company and has a good future due to growing agricultural demand. This stock was trading for about $112 per share just a few weeks ago and could rebound sharply in 2012, especially if European leaders act more decisively towards resolving the debt crisis.
Dejour Energy (DEJ) is an independent oil and gas company. Dejour has an excellent management team that made investors many times their original investment in a previous publicly traded oil company. Dejour CEO Robert Hodgkinson founded Optima Petroleum, which later became Petroquest Energy (PQ) and now trades on the NYSE. This company appears to be gathering momentum in terms of drilling progress and could be a multi-bagger in 2012. Multiple analysts have recently initiated buy ratings and one analyst has a long-term price target of $2.50 per share. Dejour could be acquired by a larger oil company because the valuation is way too low considering the drilling prospects for the next few years. In the meanwhile, the stock is making higher highs and higher lows in a very weak market, and that is a very bullish sign for future gains.
Freeport McMoran Cooper & Gold (FCX) is a leading gold, copper and silver mining company. The 50-day moving average is about $37.91 and the 200-day moving average is about $45.64. These shares have traded in a 52-week range between $28.85 and $61.35. Earnings estimates for FCX are about $5.03 per share in 2011 and $4.77 for 2012. FCX pays a dividend of $1 per share which is equivalent to a yield of 2.6%. This stock was trading around $56 in July and has since plunged to current levels. This stock looks very undervalued based on the PE ratio, and it should rebound in January.
The data is sourced from Yahoo Finance and stockcharts.com.
Disclaimer: 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.
Disclosure: I am long F, DEJ, CPE.