2 Under-The-Radar Stocks With Low Valuations, Improving Technical Strength

|
 |  Includes: ACM, TWGP
by: Bret Jensen

The five month rally in the market has made it extremely difficult to find new bargains in equities. One area I am currently looking at is in stocks that have underperformed the S&P by over 15% in the last year, have low valuations and are showing increasing technical strength. Here are two underfollowed stocks that make the grade.

AECOM Technology Corporation (NYSE:ACM):

AECOM Technology Corporation provides professional technical and management support services for commercial and government clients worldwide. (Business Description from Yahoo Finance)

4 reasons ACM is a good value at $23 a share:

  • The stock has shown increasing technical strength since it bottomed in October and just crossed over its 200 day moving average (see chart).

Click to enlarge

  • It is selling near the bottom of its five year valuation range based on P/E, P/B, P/CF and P/S.
  • The company made $2.33 a share in FY2011, is projected to make $2.52 in FY2012 and analysts' consensus estimates for FY2013 are for $2.89 a share.
  • The company has underperformed the S&P by around 21% over the last 52 weeks. The stock has a five year projected PEG of under 1 (.77) and the median analysts' price target on ACM is $28.


Tower Group (NASDAQ:TWGP):

Tower Group, Inc., through its subsidiaries, provides a range of commercial, personal, and specialty property and casualty insurance products and services to businesses in various industries and to individuals in the United States. (Business Description from Yahoo Finance)

4 reasons Tower Group is a buy at under $23 a share:

  • The stock has improved technically recently and just crossed its 200 day moving average (see chart).

Click to enlarge

  • TWGP yields 3.3% and it has raised its dividend payments by an average of over 40% a year over the last five years.
  • The stock is selling at the very bottom of its five year valuation range based on P/S, P/CF and P/B. It has underperformed the S&P by just under 19% over the last 52 weeks.
  • The stock sells for just over 8 times forward earnings, a low five year projected PEG of under 1 (.67) and the median analysts' price target on TWGP is $27 a share.

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