2 Resource Stocks Under $15 With Significant Upside Potential

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Includes: GSM, TLM
by: Bret Jensen

Chinese GDP growth came in at 8.9% in the fourth quarter. Although this was the slowest growth in 10 quarters, it came in better than expected. I think this will help relieve some of the worries about demand coming down too much in the emerging world, which have provided a headwind to resource stocks.

They could possibly have a good run in the first quarter. Here are two equities I am looking at for new investment. Both have reasonable valuations, good prospects and seem to have technical support as well. They are relatively unknown and both sell for $15 a share.

Talisman Energy (NYSE:TLM) -

Talisman Energy Inc., an upstream oil and gas company, engages in the exploration, development, production, transportation, and marketing of crude oil, natural gas, and natural gas liquids. It primarily operates in North America, the United Kingdom, Scandinavia, and southeast Asia.

(Business description from Yahoo Finance)

4 reasons TLM is a solid bargain at $11 a share:

· The stock appears to be bottoming and has technical support at current levels (See chart).

click to enlarge
Click to enlarge

· Talisman is significantly under analysts' price targets. Credit Suisse has an "outperform" rating and a $23 price target on TLM. The median analysts' price target on the stock is $20.50.

· The stock is selling at the bottom of its five year valuation range based on P/B, P/S and P/CF.

· The company is rapidly increasing earnings. It made $.38 in FY2010 and should make $.76 in FY2011. Analysts currently have $1.04 a share pegged for FY2012.

Globe Speciality Metals (NASDAQ:GSM) -

Globe Specialty Metals, Inc., together with its subsidiaries, produces and sells silicon metal and silicon-based alloys in North America, Europe, South America, and Asia. The company primarily offers silicon metal that is used as a raw material for silicone compounds, aluminum, and polysilicon. (Business description from Yahoo Finance)

4 reasons GSM is a buy at $13 a share:

· It has a five year projected PEG of under 1 (.78) and an insider bought 10,000 shares at a higher price levels in August.

· The stock is selling near the bottom of its five year valuation range based on P/B, P/E, P/S and P/CF. It also sells at less than 10 times forward earnings.

· The stock appears to be in a bottoming process (See chart).
Click to enlarge

· Talisman is way under analysts' price targets. Credit Suisse has an "outperform" rating and a $22 price target on TLM. The median analysts' price target on the stock is $19.50.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TLM over the next 72 hours.