Two Year-End Bargains: Hercules Offshore, United Rentals

I have been searching for year-end bargain stocks which meet the following criteria:

• Good fundamentals
• Positive earnings
• Low p/e ratio
• Stock price selling near book value

Based on these, I like Hercules Offshore (HERO) and United Rentals (URI).

Both stocks are off their 52 week highs and therefore are likely oversold from year-end tax loss selling. With these fundamentals, I think both stocks have a good risk/reward ratio and are likely to outperform the market.

Hercules Offshore (currently trading around $24.5) is an oil rig services company which operates in the US Gulf of Mexico and overseas. The stock has been weak which is probably due concerns about the recent acquisition of Todco and low natural gas prices which affects drilling activity/rates. If natural gas prices firm up and the integration risks are alleviated, it will remove some negative sentiment. It has had a very substantial amount of recent insider buying which I think bodes well for 2008.

United Rentals (currently trading around $21) is a construction and industrial rental company which was recently a takeover target until the deal fell through. I think there's a good chance another deal (perhaps renegotiated) will come along but if not I think it still has upside potential. It is currently trading around $21 per share which is far less than the $34.50 per share it was recently offered before the takeover fell apart.

Any investment in these or other stocks has risks and you should research them thoroughly to verify if they are suitable for you.

Disclosure: Authors owns position in URI and HERO

Comments

[Norman Lepoff, M.D.]

I agree with HERO as that was the only one of the two I follow. This article is very informative.