Investing is all about buying low and selling high. The problem is that it is not always easy to know when a stock is cheap. It can be even more difficult to tell whether a "high" is a good to sell or the start of something much bigger and more profitable. Instead of depending on conjecture, investors need to take just as close a look at a company's competitors as it does the company in question. It is also a good idea to look at the volume of hedge fund investment in the company. A high amount of hedge fund investment tends to indicate a good company to invest in. Hedge fund managers are usually "in the know" and aren't likely to take big risks.
Here are five stocks that are worth checking into now, while the price is still low:
Bank of America Corp. (NYSE:BAC) is a $76.91 billion market cap company. It is currently priced at 6.52 times its forward earnings. The last few years have been difficult for BAC. Its earnings decreased an average of -31.36% per annum over the last five years. However, if analysts are right, that is all about to change. They predict BAC's EPS will increase by 15.50% per annum over the next five years, outpacing industry earnings expectations of 9.15%. BAC is smaller than its rival Citigroup (NYSE:C), with its market cap of $88.83 billion, but BAC has higher revenues than C ($80.04B vs. C's $66.58B).
Dell, Inc. (NASDAQ:DELL) has a $29.98 billion market cap and is currently priced at 8.30 times its forward earnings. Things have been fairly good for DELL. Its EPS has increased an average of 9.51% per annum over the last five years. Going forward, analysts predict DELL's EPS will grow at roughly half that rate, estimating EPS growth of 5.14% per annum over the next five years. David Einhorn's Greenlight Capital initiated a new positon in DELL during the fourth quarter.
Ford Motor Co. (NYSE:F) has a $48.60 billion market cap. The company is currently priced at 8.25 times its forward earnings. Ford's EPS has grown at an impressive average rate of 40.14% per annum over the last five years. Analysts predict the company's EPS will grow at 9.70% on average per annum over the next five years, falling several percentage points shy of industry EPS estimates. However 9.70% is still nothing to sneeze at.
General Motors Co. (NYSE:GM) is $38.68 billion market cap company. GM is priced at 6.65 times its forward earnings. Analysts are bullish about GM's EPS going forward. They predict the company's EPS will increase by an average of 14.18% per annum over the next five years, beating industry EPS expectations of 13.98%. David Einhorn also disclosed a large position in General Motors in Greenlight Capital's Q4 letter.
Hewlett-Packard (NYSE:HPQ) had a $55.53 billion market cap. The company is currently priced at 6.23 times its forward earnings. HPQ's EPS grew by 13.79% on average per annum over the last five years. Analysts forcast the company's EPS will increase by just 4.45%, a far cry from its historical EPS growth, and quite a bit less than its industry's EPS expectations of 13.25%. HPQ has strong revenue. At $221.54 billion, its competitor, International Business Machines (NYSE:IBM), has a market cap that trumps HPQ's, but its revenue actually comes in less than HPQ's; HPQ has a revenue of $127.24 billion compared to IBM's $106.92 billion. Warren Buffett played it safe and invested more than $10 billion in IBM. We think Hewlett-Packard is a better bet than IBM.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.