Sometimes the markets will give investors the opportunity to purchase great stocks that are trading for a fraction of their value. The reason why is because there could have been sudden changes in the economy. In some cases these stocks are a good buy based on fundamentals. While at other times, a company may have introduced new products and services that have transformed its business model. Once this takes place, investors can realize above average returns by purchasing these kinds of stocks. Six companies that would fall into this category include Ford Motor Company (NYSE:F), Applied Materials (NASDAQ:AMAT), Cisco Systems (NASDAQ:CSCO), News Corp. (NASDAQ:NWSA), Pfizer (NYSE:PFE) and General Electric (NYSE:GE).
Ford Motor Company
Ford Motor Company's current strategy is Alan Mullaly's latest creation. However, Mullaly is still working to accomplish much under the Ford and Lincoln brand names. At the same time, the auto maker is involved in the production / distribution of parts and offers financing to customers through the company’s financial services division. In the past 52 weeks the price of the stock has fallen from a high of $18.97 to a low of $9.05. This is because earnings have been very volatile going from: $.36 to as high as $.65. However, from a valuation standpoint the company appears to have been oversold, as Ford has a forward PE ratio of 6.94 and current ratio of 1.23. The different factors are important, because they are showing how the company has turned the corner and can be able to easily see an increase in value once the earnings become more stable.
Applied Materials is a critical link in the semiconductor manufacturing chain. Its products are sold to semiconductor, flat panel and solar photovoltaic manufacturers around the world. In the past year the price of the stock has been trading as high as $16.93. While in October share prices reached a 52-week low of $9.70. This is because the earnings of the company have been very volatile during that time with Applied Materials realizing a decline from $.38 to $.21. From a valuation standpoint the stock has been oversold with the company having a forward PE ratio of 9.47. Moreover, the company has revenue of $10.52 billion, $6.42 billion in cash and $1.95 billion in debt. This is significant, because it is showing how the markets are discounting the price of Applied Material more than necessary. For value orientated investors this is a good way to purchase a company that can offer above-average returns once there is more clarity in the earnings. This is when the company could see a rapid increase in its stock price.
Cisco Systems is a has-been and its day in the sunlight has waned. The company relies on its sales team and contracts to sell to technology companies for the use of downloading data for video applications and on mobile phones. At the same time, the company is also providing customers with a host of IT security solutions. Over the past 52 weeks that stock has traded off of the low of $13.30 to go to a high of $22.34. This is because the company has been seeing a consistent increase in earnings with these numbers rising from $.37 to $.43. From a valuation standpoint the price of the stock is oversold. Evidence of this can be seen by the fact that the company has a forward PE ratio of 9.54, revenue of $43.72 billion, $44.39 billion in cash and $16.58 billion in debt. These factors are important, because it is showing how the company has rising earnings and low valuations. This will help to push the price of the stock higher over the long term.
News Corp has remained the bold owner the Fox Network, Fox News, the New York Post, the Wall Street Journal, the London Daily Mail and is involved in the production / distribution of movies along with television programs. Over the last 52 weeks the stock has traded off its lows of $13.38 to a high of $18.35. This is because the company has been seeing earnings that have been consistently beating analysts’ estimates going from $.26 to $.36. From a valuation standpoint the price of the stock is oversold with the company having a forward PE ratio of 10.46, $15.45 billion in debt, $11.43 billion in cash and $33.94 billion in revenue. These factors are important, because they are showing how the stock has the ability to trade considerably higher over the long term (especially if the earnings begin to rise even more than expected).
Pfizer is still facing a severe patent cliff for many of its profit-center drugs. A few of the most notable include: Liptor, Enbrel, Lyrica, Celebrex, Viagra, Xalabrands, Effexor, Norvasc, Zyvox, Geodon / Zeldox, Detrol / Detrol, Zosyn / Tazocin, Genotropin, Protonix and Chantix / Champix. Over the past four quarters the company has been seeing consistent increases in earnings going from $.47 to $.62. This has caused the stock to trade off its 52-week lows to go to a high of $21.75. From a valuation standpoint the price of the stock is oversold with the company having a forward PE ratio of 9.39, revenue of $68.78 billion, debt of $41.05 billion and $28.98 billion in cash. These elements are important, because it is highlighting how shares could move much higher over the long term.
General Electric is a large conglomerate that has, in the past, overextended itself financially. This has caused earnings to come in between $.35 (for the fourth quarter 2010) and $.31 (for the third quarter 2011). As a result the price of the stock has traded in a tight range between $14.02 and $21.65 over the past 52 weeks. From a valuation standpoint General Electric is oversold with a forward PE ratio of 11.58 and a current ratio of 2.35. This is significant, because it is showing how the company can see an increase in share prices once earnings stabilize and start to rise.
Clearly, there are many good buying opportunities in the markets. The above stocks are some of the long-term positions that have been oversold based upon fears that these businesses are not expanding. However, when looking beneath the surface it is clear that all of these companies are oversold and have the ability to provide consistent long-term growth.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.