2 Specialty Metals Stocks That Have Further To Run

 |  Includes: GSM, KRO
by: Bret Jensen

The stock market and commodity based equities have had a good run over the last two months. I still think there are still some good bargains in the space. Here are two stocks that look like they have further to run.

Globe Specialty 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. It also produces silicon-based alloys, such as ferrosilicon; magnesium-ferrosilicon-based alloys known as nodularizers; ferrosilicon-based alloys known as inoculants; calcium silicon alloys; and cored-wire silicon-based alloy products, as well as carbon electrodes, silica fume, and fines.

(Business Description from Yahoo Finance)

4 reasons GSM is a good value at $14 a share:

· The stock looks like it has bottomed and just crossed its 50 day moving average (See chart).

click to enlarge

Click to enlarge

· The company has a solid balance sheet with approximately $50mm in net cash and a five year projected PEG of under 1 (.86).

· Credit Suisse has an "Outperform" rating and a $22 price target on GSM. The median analysts' price target of just under $20.

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

Kronos Worldwide (NYSE:KRO) -

Kronos Worldwide, Inc. engages in the production and marketing of titanium dioxide pigments primarily in North America and Europe. The titanium dioxide pigments are used to impart whiteness, brightness, opacity, and durability for products, such as coatings, plastics, and papers, as well as various specialty products, such as inks, food, and cosmetics.

(Business Description from Yahoo Finance)

4 reasons Kronos is a buy at $22 a share:

· The stock is selling near the bottom of its five year valuation ranged based on P/E and P/CF. The stock also has a 2.7% yield.

· The company is rapidly increasing earnings. It made $1.29 a share in FY2010, looks to earn $2.62 in FY2011 and analysts project it to make over $3 in FY2012.

· The stock is cheap at about 8 times operating cash flow and with a 5 year projected PEG of just .4.

· Insiders have bought over 500,000 shares in the last few months and Deutsche Bank initiated the stock as a "Buy" in December.

Disclosure: I am long KRO.