Almost everyone loves a bargain, but for some reason, many investors often run away from stock bargains. When merchandise is on sale at the local mall for 50% off, people tend to buy, sometimes even purchasing items they don't need or that don't fit that well. However, when it comes to investments, people are often wary of anything that has dropped in price by 50%. It's perfectly normal to have that reaction since it could drop even further and after so many investors have lost money, who wants to join them?
This is where smart investors put emotion aside, and after doing some fundamental analysis, start buying bargain stocks. If there is concern about the stock dropping even further, it makes sense to buy in stages over time. This gives investors a chance to average down and even look forward to a stock dropping further, even if they own it already. Recessions and European debt fears won't last forever, so investors with a 3 to 5 year time horizon should be considering cheap stocks now. Here are a few solid companies with stocks that are well below the 52 week high. These companies have fundamentally sound business models, and the stocks should eventually trade much higher in time:
Valero Energy Corp. (NYSE:VLO) operates retail fueling stations and is also a leading refiner of petroleum products. Refinery margins have been under pressure, and this has been confirmed by a couple of companies with refining operations who recently reported earnings. However, margins are likely to stabilize and even improve over time. Longer term investors should use this issue to buy refining stocks on dips. Valero shares have a book value of $29.81 and trade at a price to earnings ratio of about 6. This company does have the fueling stations which diversifies the revenues and profits until refining operations improve. If Valero can remain solidly profitable even with margin pressures, just imagine how high profits could be in the future when margins normalize. The dividend pays investors to wait for a higher stock price which is bound to come in the next couple of years.
Here are some key points for VLO:
- Current share price: $24.12
- The 52 week range is $16.40 to $31.32.
- Earnings estimates for 2011: $3.49 per share
- Earnings estimates for 2012: $3.51 per share
- Annual dividend: 60 cents per share which yields 2.5%
Whirlpool Corporation (NYSE:WHR) designs, manufactures and markets major appliances such as dishwashers, stoves, refrigerators and other items. This company sells under well-known brands such as Maytag, Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, and others. This stock is trading for about half the 52 week high and close to book value which is $55.78, so now is a good time to invest. Whirlpool is expected to report earnings soon, and it could see weaker than expected results due to Europe and other issues. It makes sense to use any pullbacks when earnings are reported as a buying opportunity.
Here are some key points for WHR:
- Current share price: $54.60
- The 52 week range is $45.22 to $92.
- Earnings estimates for 2011: $9.24 per share
- Earnings estimates for 2012: $5.83 per share
- Annual dividend: $2 per share which yields 3.7%
General Motors, Inc. (NYSE:GM) is a leading U.S. auto maker with brands such as Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Opel, Isuzu, and others. The U.S. Government bailed out this company and still owns a substantial amount of stock, which it plans to sell someday. Some consumers and investors have avoided GM products and the stock because of the bailout, however GM is making great cars and the stigma will fade over time. GM is earning solid profits, even in a weak global economy, and the stock is trading barely over book value-- which is $21.96. Ford (NYSE:F) recently announced weaker than expected earnings and the stock fell. GM is also likely to report weak sales from Europe. If the stock drops on earnings or other issues, it is a good buying opportunity.
Here are some key points for GM:
- Current share price: $24.37
- The 52 week range is $19.00 to $37.23
- Earnings estimates for 2011: $3.91 per share
- Earnings estimates for 2012: $3.72 per share
- Annual dividend: None
BP PLC. (NYSE:BP) is one of the largest integrated oil and gas company in the world and is based in Europe. BP or British Petroleum is still challenged by legal issues and expenses from the oil spill in the Gulf of Mexico, however, the company continues to make progress and is working through the claims. The dividend yield is nearly 4% and is likely to rise as legal claims are resolved over the years. This stock has been trending higher, but dipped recently as news came out that Transocean (NYSE:RIG) would not be held financially responsible for the Gulf oil spill to the extent BP wanted. This type of weakness in BP shares is a good buying opportunity for long-term investors.
Here are some key points for BP:
- Current share price: $43.70
- The 52 week range is $33.62 to $49.09
- Earnings estimates for 2011: $6.15 per share
- Earnings estimates for 2012: $6.53 per share
- Annual dividend: $1.68 per share which yields 3.8%
Marathon Petroleum Corporation (NYSE:MPC) is a leading oil refining company. It also owns pipelines and operates over 5,000 retail fueling stations under the Marathon and other brand names. Like most companies with refining operations, the margins have been impacted recently, but this is creating a buying opportunity. This stock offers value on a number of fronts: The price to earnings ratio is only about 7, the dividend yield is above average at 2.7%. Plus, this stock is trading just a few dollars over book value, which is $28.15. This makes the stock attractive on any dips, especially at about $34, or less.
Here are some key points for MRO:
- Current share price: $37.53
- The 52 week range is $26.35 to $47.43
- Earnings estimates for 2011: $6.87 per share
- Earnings estimates for 2012: $5.06 per share
- Annual dividend: $1 per share which yields 2.7%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.