More Overlooked Stock 'Bargains'

Includes: APA, CVX, CY, ESV, PG, SDRL, WMT
by: Marc Courtenay

"If appropriate and depending also on assessment of the costs and risks of additional policy actions, we remain entirely prepared to take additional balance sheet actions if necessary to achieve our objectives. So those tools remain very much on the table and we will not hesitate to use them, should the economy require that additional support." (Federal Reserve Chairman Ben Bernanke at an April 25th, 2012 Press Conference).

Since Dr. Bernanke and the Federal Open Market Committee's reiterations, the stock market has rallied sharply.

Many of the more popular mid and large cap stocks have participated and benefited. Click here to see how the Dow 30 stocks have fared year-to-date.

Of those 30 companies, only 6 are in the minus column for 2012. Surprisingly, they include Chevron (NYSE:CVX), Procter & Gamble (NYSE:PG) and scandal-ridden Wal-Mart (NYSE:WMT). Any contrary takers of these giants?

Overlooked Doesn't Mean Unknown

A good example of this would be Cypress Semiconductor (NASDAQ:CY). Many don't realize they pay close to a 3% dividend and insiders are buyers.

Their CEO Dr. T.J.Rogers reported as of April 17, 2012 that he owns almost 8,278,000 shares. At $15-a-share that equals $124,170,000.

When a officer is that committed to the stock of his company we should sit up and take notice. This was discussed on a CNBC interview today.

You can get all the latest earnings reports, product release information and details about this exciting company by clicking here.

This company makes everything from programmable system-on-chip (PSoC) devices to True-Touch touchscreen controllers and CapSense touch-sensing solutions for all kinds of media applications.

They're bringing in Revenue-Per-Share (trailing twelve months) of $5.91 for a total trailing 12-month Revenue of over $947 million.

An important metric concerning any publicly-traded company is Return-On-Equity. CY has close to a 23% trailing 12-month R.O.E.

Analysts don't give it much respect. Their "mean recommendation" is slightly better than a "hold". Yet it is selling for less than 12 times forward earnings and at a Price-to-Sales ratio of 2.43.

They missed some numbers last quarter, know what they did wrong, and The Street has low expectations for them going forward.

On April 10th the stock's price dipped as low as $13.96, so patience may be part of the success formula for investors with this jewel.

"Drill-Baby-Drill"in the Deep Blue Sea

Another overlooked stock that has passed "under the radar screen" of the financial media is SeaDrill Ltd (NYSE:SDRL).

This Hamilton, Bermuda based company is an offshore drilling contractor and provides offshore drilling services to the oil and gas industry worldwide.

It also offers platform drilling, well intervention, and engineering services. With a 43% operating margin and a 35% profit margin, this "bargain" stock is firing on all cylinders.

Matthew Carr, the Contributing Editor of The Peak Energy Strategist recently had this to say to their subscribers:

"Seadrill sports the most modern fleet in the drilling industry, and continues to add to those numbers with new builds. In 2005, Seadrill had a mere five rigs. Today, it has over 60, and announced two more rigs are on the way this month."

With over $4 billion in Revenue and $1.82 billion in Operating Cash Flow, one understands that they could afford to pay a healthy dividend.

Yet I was stunned to see that their dividend is over 8.3%, which is a 79% payout ratio.

That's quite high, but when I found out they have a huge contract backlog of over $13 billion, I decided to investigate this company more enthusiastically. Below is a 1-year chart of SDRL.

Chart forSeaDrill Limited (<a href=

You can see that the stock price has been stable but is well off its late Feb. 2012 high of $42.34. As future earnings increase so will the share's price.

You can also see the scope of their operations and the focus of their management by carefully walking through their web site. It's a real eye-opener.

When I saw their business strategy is to keep rewarding shareholders and
the depth of this company's ability to grow their earnings and revenues (see their financial reports),I decided to become an investor.

By the way, SDRL invests in other companies, including one of their competitors, London,England based Ensco (NYSE:ESV).

ESV is yet another overlooked bargain selling at just 8 times forward earnings. The high level of demand for their ultra-deepwater fleet of drill-ships is opening the way for increases in revenue and earnings.

Ensco Chairman, President and CEO Dan Rabun recently discussed the major opportunities that are available to companies like ESV.

"An ongoing trend of new deepwater oil and gas discoveries around the globe is creating a high demand for equipment capable of tapping those resources", he said on April 5th.

ESV looks undervalued from another of my favorite metrics, the 5-year expected PEG ratio. Theirs is just 0.63.

Their payout ratio is a healthy 45% so they can afford to sustain and even increase their almost 3% dividend.

Ensco quarterly earnings growth (year-over-year) was an impressive 73% which compared quite favorably to SeaDrill's last annual tally.

SDRL had a trailing 12-month R.O.E. of around 25%. ESV had an R.O.E. of only 7.19%, but according to their projections that should improve.

Ensco's first quarter 2012 earnings call will be on Thursday, May 3rd before the markets open in New York.

The company claims to be "...ranked #1 for total customer satisfaction and received top honors in 12 of 16 other categories in the most recent annual survey by EnergyPoint Research.

"Operating the world's newest ultra-deepwater fleet and largest fleet of active premium jackups, Ensco has a major presence in the most strategic offshore basins across six continents", they proclaimed.

Cautious investors may want to wait until May 3rd when the earnings results for Ensco's 1st quarter 2012 are announced. Study their press releases carefully to draw your own conclusions.

Another company that made our list of "Overlooked Bargains" was Apache Corp.(NYSE:APA),with a forward PE ratio of 6.8. They too are scheduled to release their earnings on May 3rd.

It's not how many companies you own that counts. Some own such a broad number of stocks they look like they're running a mutual fund.

Choosing a very select list of profitable, high quality companies and buying them while they're still cheap is what counts and what pays.

Disclosure: I am long APA.