Almost all stocks have been hit very hard in the past couple months. As with every market sell off, this has created some significant opportunities. The stocks below are trading at valuations that appear to be a major buying opportunity. Based on current valuations, these stocks could offer shareholders strong returns going forward.
While there are plenty of reasons to be negative and fearful of stocks in this economy, it often pays to buy when things look as bad as they do now. Expectations are low and chances are that the economy will get better in the future. These stocks are worth considering based on dirt cheap valuations. These 5 companies are all sensitive economic fluctuations and due to these concerns, the stocks have been punished more in recent months than the overall market. However, the potential economic concerns appear to be priced in already, and these companies have solid business models. All of these stocks have PE ratios of about 5 times earnings and also look cheap based on other metrics like book value. With these 5 stocks already trading at valuations that indicate very low expectations and growth potential, there is a strong chance for upside surprises:
United Continental Holdings Inc. (UAL) shares are trading at $20.64. United is a major global airline. The 50-day moving average is $18.99 and the 200-day moving average is $20.89. The shares have traded in a range between $15.51 to $27.72 in the past 52 weeks. UAL is estimated to earn about $3.67 per share in 2011 and $5.31 in 2012. This puts the PE ratio at ridiculously low levels, just about 5 times 2011 earnings, and less than 5 times earnings for 2012. Book value is listed at $6.99 per share. Higher oil prices and economic concerns have been impacting airline stocks, but now the price of oil is dropping and that is great for profit margins at any airline.
Invesco Mortgage Capital, Inc. (IVR) is trading around $14.89. Invesco is a mortgage real estate investment trust. The 50-day moving average is $15.05 and the 200-day moving average is $17.99. These shares have traded in a range between $12.55 to $24.07 in the last 52 weeks. IVR pays a dividend of $3.20 which is equivalent to a 21.6% yield. The book value is $16.45. IVR is estimated to earn about $3.45 per share in 2011, and $2.95 in 2012. This puts the PE ratio at only about 5, and the stock looks cheap based on every other metric as well.
Hartford Financial (HIG) shares are trading at $15.66. HIG is a leading insurance company. The 50-day moving average is $17.66 and the 200-day moving average is $22. This stock has been impacted by storm losses, legal expenses, and a major market correction, but this has created much lower prices and a great long-term buying opportunity. Earnings estimates are about $1.84 for 2011, and are expected to jump to $3.36 per share in 2012. Hartford is extremely undervalued and trades at a PE ratio of less than 5 times 2012 earnings. HIG pays a dividend of about 40 cents per share, which is equivalent to a yield of about 2.5%. This stock is trading well below book value which is stated at $49.89.
Vale S.A. (VALE) is trading around $20.99. Vale is a leading mining company, and is based in Brazil. The 50-day moving average is $24.17 and the 200-day moving average is $28.86. These shares have traded in a range between $20.90 to $37.24 in the last 52 weeks. Earnings estimates for VALE are about $4.57 per share in 2011 and $4.15 for 2012. This puts the PE ratio at about 5 times earnings. VALE pays a dividend of 6 cents per share which is equivalent to a yield of .2%. This stock was trading around $30 in August and has since plunged to current levels. This stock is being impacted by concerns of a slowdown in China and Europe, but this is providing a good buying opportunity for long-term investors.
General Motors (GM) shares are trading at $20.10. GM is a leading automaker. The 50-day moving average is $22.57 and the 200-day moving average is $26.91. Earnings estimates for GM are just over $4.40 per share in 2011 and $4.61 for 2012, so the PE ratio is only about 5. The fear for some investors is that the U.S. and the global economy is about to fall into another major recession. A significant global economic downturn would impact GM, but the stock seems to be pricing in a lot of bad news and fear already with it trading for about 5 times earnings. One recent positive is that the price of oil has been dropping. Low oil prices are generally positive for cars sales, and consumer sentiment.
The data is sourced from Yahoo Finance and Insidercow.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I am long GM, HIG. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.
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