While many companies are rising past their fair values,
others are trading at potential bargain prices. Although many
investors would rather have nothing to do with stocks wallowing
at 52-week lows, it makes sense to see whether the market has
overreacted to a company's bad news.
Here's a look at three fallen angels trading near their
52-week lows that could be worth buying.
A refined value stock
Similar to the past couple of weeks I'm going to turn your
attention to the oil and gas sector to kick things off. Piquing
my interest this week in the value stock column is refiner
user Rongy Benjamin.
Unlike the rest of the oil and gas sector which has been
pummeled by a 50% drop in crude
since the summer, CVR has an additional concern to contend with.
In July a fire at its Coffeyville, Kan., refinery shut down
production and required expensive repairs and maintenance,
reducing revenue and profitability. This combination of weaker
oil prices and unexpected downtime have certainly disappointed
Wall Street and investors.
But, there's good news as well! For starters, while a refinery
fire is unfortunate it's not a long-term determinant of the
success or failure of CVR's business. To put it another way,
beyond a few quarters this is a non-recurring cost that hasn't
affected the long-term business strategy one iota. The assumption
would be that Wall Street could be in for a pleasant surprise as
expenses tied to these repairs dip in the latter half of
Secondly, falling oil prices can actually be great news for
refiners. Falling crude oil prices have a tendency to widen crack
spreads, which is the measure of margin for refiners. As crack
spreads widen, refineries like CVR Refining can bring in less in
revenue and actually earn a bigger profit. Furthermore, cheaper
prices for gasoline and heating oil could actually spur demand
for these products among consumers, taking the desire for
drillers to cut production out of the equation since demand could
With CVR valued at just five times forward earnings I believe
the bulk of investor worries are already priced in. It's possible
could see a dividend cut
in the near future, but a yield in excess of 5%-6% appears
sustainable in my opinion.
International returns you can bank on
With investors constantly looking for the next value stock in the
financial sector, I'd suggest expanding your search far beyond
the borders of the United States and taking a closer look at
Chile's most profitable and well-known financial institution,
Banco de Chile
Source: Banco de Chile.
Banco de Chile is largely under the radar for a nearly $11
billion bank, averaging a mere 52,500 shares traded per day and
attracting coverage from just a few Wall Street analysts. Why
might Wall Street be uninterested in Banco de Chile? It very well
may have to do with Chile's uninspiring GDP growth. Since 2008
the economy has slipped into negative growth on five separate
occasions. Even when GDP is expanding it's often been to the tune
of less than 2%. Banks are cyclical and they can struggle to grow
when the country they operate in isn't performing up to
However, there's a lot to like about this oft-overlooked
international bank. To begin with, the company's return on
average assets and return on average equity roared higher in the
third quarter from the year-ago period. ROAA rose 21 basis points
to 2.42%, while ROAE jumped 136 basis points to 26.33%.
Impressively, Banco de Chile managed this increase in spite of an
11 basis point dip in net interest margin. The company can thank
higher revenue from loans, more income from its AFS portfolio,
and improved credit quality in its loan portfolio for the bulk of
Banco de Chile is also well-capitalized, with a tier 1 ratio
of 10.3%, 34 basis points higher than where it was at this time
last year. It would be even higher if the company didn't divert
so much into loan loss reserves, but another way to look at this
is Banco de Chile is well prepared to deal with any minor
downturn in the Chilean economy.
Banco de Chile offers investors a chance to own a piece of
Chile's most successful and well-recognized bank for just 11
times forward earnings. Tack on a dividend yield that's likely to
approach 4% year in and year out and you have a bank value stock
worth putting on your radar.
Good for your health and your wealth
Lastly, I'd encourage value investors to take a closer look at
, a software developer aimed at improving the operational
performance of the healthcare industry.
Source: NEC Corporation of America via
MedAssets' biggest problem in recent quarters has been the
uncertainty created throughout hospitals and outpatient clinics
because of Obamacare's rollout. On the surface Obamacare should
lead to a spending boom in the healthcare industry considering
that millions of people who were previously uninsured are now
insured. Hospitals and clinics were largely expecting to write
off less revenue since they'd be treating more people who were
covered by insurance and/or able to pay their portion of the
bill. However, a
by the Department of Health and Human Services which lowered the
number of 2014 Obamacare enrollees, coupled with very
conservative full-year enrollment estimates by the HHS, could
cause hospitals and clinics to pare back on their intermediate
spending, which isn't great news for MedAssets.
The good news is that healthcare reform practically
necessitates the need for the software that MesAssets is
developing. MedAssets' solutions can help medical care providers
analyze their costs, manage their supply chain and non-labor
sourcing, and is targeted at improving the operational efficiency
and financial performance of these care providers. It may seem
counterintuitive to spend more money upfront, but MedAssets'
solutions could be critical to saving medical care providers
money over the long run.
MedAssets' business model is also built in such a way that it
tends to lock in customers for a long period of time.
Software-as-a-service models sell an initial product to
healthcare providers and keep them attached through updates,
training, and other services. It makes leaving MedAssets for a
competitor both costly and inefficient.
At just 13 times forward earnings MedAssets is an intriguing
value stock that could pay dividends for healthcare investors
willing to look past a year or two of Obamacare-related
If you think MedAssets looks exciting, then this one
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3 Value Stocks Near 52-Week Lows Worth Buying
originally appeared on Fool.com.
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