Feeling Brave? Try Foster Wheeler

Oct. 2.08 | About: Amec Foster (AMFW)

With all the headlines focusing on the finacial crisis and the bailout plan, the markets have been a turbulent place, to say the least. It is common to see stocks up or down 10% on a given day. Up when the bailout is going to pass and the economy is going to be O.K., and down when the media tells us that we are going into a great depression.

One stock that hasn't escaped the brutal selloff is Foster Wheeler (FWLT). This is a company with a huge backlog of work that exceeds the market cap of the company which, according to the CEO, is not in danger of being cancelled unless oil goes under $70, and even then isn't a sure thing to be cancelled.

They have a forward P.E under 8 and are expected to grow earnings at 18% for the next five years. This gives them a PEG of .48. Analysts have them earning $4.24 next year, which if they were to miss by $1 would still give them a P.E of 10 and a PEG under 1.0. And let's not forget the buyback that was just announced of 15% of the shares that will help offset any weakness in earnings. On November 5 we will hear what the company has to say about the future, but judging from GE's mid-quarter update saying how strong their infrastructure group was, I am expecting good things.

All of these facts lead me to believe that the market overreacted to the downside on this stock, and while there may be more downside to come as more funds face redemptions and oil continues to fall, this is a great time to go against the crowd and start a position in FWLT, taking advantage of any further weakness to average down. This isn't for the faint of heart, but those willing to take a gamble could be rewarded in the future.

Disclosure: Author holds a long position in FWLT