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.
Booming in Brazil
For those of you unable to vacation or unwilling to go near an airport this holiday season, sit back and relax, because we're going to take a look at three international companies deserving a second chance. First up on the list is Brazilian homebuilder Gafisa (NYS: GFA) .
Unlike U.S.-equivalent homebuildersToll Brothers (NYS: TOL) and KB Home (NYS: KBH) , which cater to middle- and upper-middle-income households, Gafisa has not had any trouble maintaining solid profitability. According to a report released over the weekend by Forbes, the Brazilian housing market is likely to experience another five years of boom before prices top out. This is good news for Gafisa and for investors potentially looking for an escape from the European turmoil. Although Gafisa's earnings estimates have fallen in recent months after three straight quarterly misses, I feel that at less than six times forward earnings and trading at less than half of book value, the stock makes an intriguing buy. Don't forget, Gafisa is also one of my "10 Mid Caps to Rule Them All" as well.
Two can play at this game
Kyocera (NYS: KYO) is one of the many high-profile Japanese names that have found the going difficult following the unfortunate earthquake in March. Supply-side issues and slowdowns in orders from some of its customers have curtailed sales and dragged down profit from the year-ago period. However, removed from this one-time event, things look to be getting better for Kyocera shareholders.
Kyocera boasts one of the healthiest balance sheets around, with $31 in net cash per share. Factoring in that the company has been profitable every year for the past decade yet trades at only 80% of book value and pays out a 2% dividend yield, and you get a recipe for a possibly undervalued stock. To top this off, Kyocera turned the tables on lawsuit-happyEastman Kodak (NYS: EK) last week and filed a patent infringement suit against Kodak regarding intellectual property used in its inkjet printer line. Investors appear to have written off Kyocera for the time being, but I don't see that as the right call at this price.
The stock of steel
I can't say that the prospects of many steel companies intrigue me at the moment. Economic uncertainty around the world and the possibility of a hard landing for China's economy has successfully spooked investors away from the sector. This could make it the perfect time to consider Russian steel and coal giantMechel (NYS: MTL) .
The future demand for steel is a very difficult concept to grasp -- both for me and for analysts, apparently. Over the past year, Mechel has launched past expectations by an average of 142%... and no, that's not a misprint. Mechel has been profitable in all but one year over the past decade, and book value has grown from less than $1 to more than $11 per share. The near-term outlook might not be as lustrous as investors would like, but it wouldn't take more than a quick polish to reveal that Mechel is a reasonable risk trading below book value.
You don't have to hop on a plane to be privy to some rosy international offers this week. All three are trading below book value and have a strong history of profitability. Because of that, I'm reaffirming my CAPScalls on Gafisa and Kyocera, and adding Mechel as an outperform. The question now is, would you?
In the meantime, consider adding these potential winners to your free and personalized watchlist and get your own personal copy of our free report, "The Motley Fool's Top Stocks for 2012," to see what our analysts have dubbed the "must-own" company for the new year.
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, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't 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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