Just as we examine companies each week that may be rising past their fair value, we can also find companies potentially trading at a bargain. While many investors would rather have nothing to do with companies tipping the scales at 52-week lows, I feel it makes a lot of sense to determine whether the market has overreacted to the downside, just as we often see to the upside.
Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.
Where's the love for LUV?
Flying the friendly skies has turned into a crash-and-burn scenario for the airline sector over the past few months. Fuel costs are biting hard into bottom-line profits, as most airlines last week noted in their quarterly reports. Even Alaska Airlines (NYS: ALK) , one of the few bullish standouts of the sector, saw a 55% increase in fuel costs over the year-ago period. But I have to wonder: Where's the love for Southwest (NYS: LUV) ?
Southwest is one of the very few airlines that has positive net cash and has remained consistently profitable. Southwest reports earnings considerably later than many of its peers, but based on the trends of the sector, it should do just fine. The biggest question as of now is whether an airline can successfully pass along price increases to consumers, and Southwest has historically shown that its consumers have had no problem staying loyal and absorbing price hikes. At just 10 times forward earnings, this could be an opportunity you may not want to pass up.
You sunk my battleship
Shares of shipper Genco Shipping & Trading (NYS: GNK) are sinking faster than the Titanic following a downgrade from Deutsche Bank from hold to sell as the firm slashed its price target from $8 to $4. Genco has struggled to cope with increased competition and low charter pay rates, but all hope isn't lost.
As part of a recent investor roundtable on shipping, I actually singled out Genco as a solid candidate to rebound in the coming years. Unlike DryShips (NAS: DRYS) and Excel Maritime (NYS: EXM) , Genco relies on short-term charters to generate cash flow. While this can play with the heartstrings of shareholders in the near term by creating erratic cash flow, when dry bulk rates do rebound, Genco will be able to renegotiate its contracts to long-term deals with relative ease. Genco's newer fleet than most of its peers should also translate into fewer maintenance costs. At less than 0.2 times book value, Genco could be a wave to ride in the coming years.
Power on, THQ
Nothing says cyclical like the video game sector. Specifically, THQ (NAS: THQI) -- as a provider of game console, PC, and mobile games and applications -- rides the consumerism roller coaster every year.
At the moment, we are in THQ's quiet period of the year. It's not uncommon for THQ to lose money two quarters out of the year, only to more than make up for it with a highly profitable December quarter. Despite analysts expecting a loss from THQ this quarter, full-year estimates continue to call for a profit. Recent strength from GameStop (NYS: GME) indicate that the video game industry is still healthy. With THQ valued just a touch above its book value and only 7 times forward earnings, now might be the time to give this company another look.
Remember that just because a stock is at a new low doesn't mean it's an automatic sell. In fact, new lows could mean a surprising value for shareholders. Take the time to peruse the daily new 52-week lows and use your watchlist -- you might be surprised at some of the values you come across.
At the time thisarticle was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong. The Motley Fool owns shares of GameStop.Motley Fool newsletter services have recommended buying shares of Southwest and writing covered calls on GameStop. Try any of our Foolish newsletter servicesfree for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policythat's always on the lookout for a bargain.
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