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 price. While many investors would rather have nothing to do with companies tipping the scales at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to the downside, just as we often do to the upside.
Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.
Video on-demand in demand
This week we're going to take a closer look at three names in the technology sector that could be worthy of your hard-earned cash. First up is video on-demand specialist Harmonic (NAS: HLIT) .
Harmonic sells video products and system solutions that allow service providers to deliver broadcast and on-demand services. As you can guess, on-demand growth has slowed rapidly from just a few years ago, but growth has remained steady enough that Harmonic's long-term growth rate checks in at a healthy 15%. Harmonic reminds me of the tortoise that beat the hare by the end of the fabled race. Unlike Arris Group (NAS: ARRS) and Cisco Systems (NAS: CSCO) , which it competes against, it's not going to wow you with large new clients or highly cyclical growth swings. Instead, Harmonic seems to rise from each economic downswing stronger than ever. Now that the company is trading at a slight discount to book and with a squeaky clean balance sheet, it may be the time to consider Harmonic for your portfolio.
Digging in the trough
It's sometimes tough to be a long-term investor in a highly cyclical sector, but semiconductor equipment, flat-panel LCD, and solar equipment provider Applied Materials (NAS: AMAT) looks like it may be at the right price for forward-thinking investors.
Applied Materials' situation has vastly improved since the lows of the credit crisis three years ago. Looking more closely at the company's third-quarter results, it's clear that Applied Materials is still moving its business in the correct direction even if short-term traders don't see it. The third quarter marked the fifth consecutive gross margin increase, as well as the fifth consecutive double-digit quarterly revenue increase -- 10.8% to be exact. Even with challenging results lying ahead for the industry as a whole, the company is valued at a reasonable forward earnings multiple of 11 and its dividend yield has crept above 3%. All systems are go for investment if you ask me.
A ray of hope
Don't write the optical networking sector off for dead just yet. Just when Wall Street expected another round of dismal results from the sector, both Ciena (NAS: CIEN) and Finisar (NAS: FNSR) reported results that came in ahead of expectations. With that being said, there could be hope for Juniper Networks (NAS: JNPR) after all.
Juniper took a sizable nosedive after missing consensus figures and guiding lower in its most recent quarter. However, if you look at the company's long-term growth rate and take into account the health of its balance sheet, the rewards considerably outweigh the potential risks right now. Juniper's net cash position currently stands at $2.5 billion. While Juniper isn't generating the type of cash flow you can get by investing in Cisco, the more than $1 billion in levered free cash flow over the past 12-months is nothing to scoff at. With a PEG ratio currently below one, Juniper is a borderline value play.
The technology sector doesn't exactly make it easy to sleep at night sometimes given the highly volatile nature of tech stocks. Then again, it's often difficult to find double-digit growth rates when economic growth is slowing, which gives technology stocks an edge over other sectors. While there are plenty of other names out there to consider, these three offer a solid balance of growth coupled with a conservative balance sheet.
What's your take on these fallen tech angels? Are they worthy of a second chance? Share your thoughts in the comments section below and consider adding Harmonic, Applied Materials, and Juniper Networks to your watchlist.
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 Applied Materials and Cisco Systems and has created a bull call spread position on Cisco Systems.Motley Fool newsletter services have recommended buying shares of Cisco Systems. 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 good deal.
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