There are some very cheap equities on the stock market right now. This is so even after the stock market has struggled to top it's four-year highs after aggressively climbing back over 100% from the 2009 market low on the Dow Jones Industrial Average. Many leading companies continue to languish out of fears yet to be realized, and often some have potential yet to be discovered. The following four companies are some which I plan to continue buying while the market offers a generous discount to a more fair valuation.
Corning is a leading specialty glass manufacturer whose basic material technology focus continues to play a pivotal role in defining advances in tomorrow's innovation. Over the past year, the company suffered from its heavy focus on display technologies (read "LCD TV's") and fears of a double-dip recession have kept Corning's stock price from bouncing much higher off of its seemingly bound $13 - $14 range.
Yet the company's product lines continue to become more diversified, and its divisions of telecommunications, specialty materials, and environmental technology continue to steadily gain traction. Above all, the company has shown significant advancements in developing products useful for growing markets. While the company's Gorilla Glass may be the buzz word that has become synonymous with Corning's brand, an even greater product may lie in its Lotus Glass - a product for OLED applications that is likely to gain much traction though the company's joint venture with Samsung.
In late October 2011, Corning signaled to the market to keep their chins up high. The company boost their quarterly dividend by 50% and announced a $1.5 billion stock repurchase program. As of May 12, 2012, the company's $20.20 billion market capitalization carried a 0.95 price-to-book ratio with a trailing price-to-earnings ratio of 8.3. Yet with over $3 billion in cash flows coming in from operating activities annually, investors should continue to look forward to possible acquisitions or increased returns of value to shareholders.
Seagate Technologies (STX)
Anyone who's shopped around for computing storage space lately might be quick to deem hard-disk drive (HDD) maker Seagate on the way out. After all, there would appear to be less use for HDD manufacturers as solid-disk drives (SSDs) continue to make its way onto the market. Yet those who also understand that the push towards cloud computing storage involves massive amounts of capacity, also recognize that disk storage space has become all but become a commodity in high demand. With SSDs capable of fractions of the amount of storage that HDDs can provide, the race is on between the remaining HDD manufacturers to supply in a growing-demand environment.
Seagate Technology trades with a market capitalization of $13.24 billion. Although the company carries a trailing price-to-earnings ratio of 7.04, its forward price-to-earnings ratio is a surprising 3.31 based on analyst EPS estimates of $9.42/share for the year ending June 2013. The company has supported a very shareholder friendly position as it increased its dividend 39% to $0.25 quarterly. Additionally, the company recently expanded its $1 billion share buyback by another $2.5 billion. This brings the current authorized amount to $3.5 billion. Though trading at a 52-week high, investors should focus on what the company's doing before pondering if Seagate has already run its course.
While likely being the most complicated company on this list to understand as being a current bargain, Solazyme also reigns as likely being the most undervalued in the long run. I would recommend investors to read my numerous other articles to understand my bullishness pertaining to this company. One could begin with the one located here.
Solazyme is a self-proclaimed renewable oil maker, but those following the company's progress know that it is very much evolving into a renewable oil innovator. The company uses biotechnology to convert low-cost sugars into high-valued oil products. Thes oils have thus far provided enhanced capabilities and value when contrasted against the products they're replacing. As for the markets these oils address, they are capable of replacing oils derived from petroleum, plants, or even animal fats. Most importantly, once the company's facilities are fully constructed (as they are being made right now) the company has little to fear when it comes to competing against the barrel of oil - a criticism that has so frequently attacked its industry peers.
As a surprising advantage of the company's technology, Solazyme is able to tailor its output in very precise ways. This allows for it to create oils that are fit-for-purpose to industry but are not inherently produced in nature. As a result, the company's innovative products on the basic material scale allows for it to gain vast competitive advantages and allows for downstream innovation by its partner companies. The company currently has several agreements with industrial giants such as Dow Chemical (DOW), Unilever (UL), Bunge (BG), and Chevron (CVX) to name a few. In its most recent conference call, the company detailed its new oil profile. It asserted that Solazyme has the capability to fully eliminate polyunsaturated fatty acids in its oil - a capability sought by oilseed producers which is likely not possible to be realized from customizing plant seeds.
Xinyuan Real Estate (XIN)
Fears of a Chinese real estate market crash combined with concerns over the legitimacy of Chinese equities trading on the American exchanges have prompted this real estate developer to see ongoing declines since its IPO in late 2007. Of course, the Great Recession had just a little something to do with the falling price as well. Yet despite a booming business and the privileged status of trading on the NYSE, Xinyuan Real Estate has only recently found some traction to hang its hat onto. As the developer of residential properties in Tier 2 and Tier 3 cities, the company is also less likely to be the victims of shifting government policies geared at slowing down the overheating markets of Tier 1 cities.
As of May 12, the company trades with a market capitalization of $251.61 million. Despite a share price that has doubled within the last 6 months, the company still trades with a forward price-to-earnings ratio of 2.41. In its latest earning conference call, the company asserted that its book value per ADS was $8.99, resulting in a ridiculous low price-to-book ratio of 0.38. The company recently increased its dividend by 60% to $0.04/ADS, equating to $0.16/ADS for the year. It had also converted its distribution from an annual basis into a quarterly distribution. At the current market price, this would yield a more-than-ample 4.6% yield going forward.