3 Shares I Might Buy Right Now

LONDON -- As the European debt crisis drags on, the outlook for the stock market has been dire -- and shares have fallen to their lowest valuations since 2009. But for the enterprising investor, now could be the perfect opportunity to find solid companies trading at a discount.

Amid the rubble, here are three stocks I am considering for my portfolio:

Renault (32 euro/9.5 billion euro market cap)
is a French-based motor manufacturer that markets vehicles under the Renault, Dacia, and Samsung Motors brands. It also has a business segment, RCI Banque, which provides car financing and other commercial services.

Renault's performance has been less than stellar during the past few years, with declining sales in Spain, Italy, France, and the U.K. Its shares have dropped to about 32 euros since trading at 67 euros in September 2009.

If you examine Renault's books carefully, however, you will find that there is more value on offer than just the core business. You see, Renault owns significant stakes in several companies: Nissan, 43%; Volvo, 7%; Daimler, 1.6%; and AvtoVaz, 25%. The total market value of these stakes is currently 16 billion euros. Meanwhile, RCI Banque, the profitable financing arm, has a book value of 2.6 billion euros and generated after-tax profits of 493 million euros last year. Renault's market cap is currently 9.5 billion euros, which is only 49% of the total value of all these assets.

Renault in itself has compelling numbers: a price-to-book ratio of 0.36 and price-to-earnings ratio of 4.3, with a dividend yield of 3.3%. Also, its core operations are showing positive signs. Despite declining European sales, total sales have increased by 26% since 2009 and have this year seen a 9% annual increase. Cash flow from operations has increased to 500 million euros, too, enabling the company to decrease net debt down to 229 million euros during the last three years.

Growth has been fueled mainly by increased sales in international markets, which accounted for 43% of total revenues sales in 2011 compared to 37% in 2010. The company sees continued growth in emerging markets and is focusing its efforts on Russia, Brazil, and India.

Alliance Pharma (23 pence/55 million pound market cap)
Alliance Pharma
(ISE: APH.L) is an AIM-traded specialty pharmaceutical company that sells licensed and acquired pharmaceutical products.

Unlike most small-cap pharmas, which focus on developing new treatments, Alliance concentrates on acquiring out-of-patent products with stable sales in niche markets.

The logic here is that such products tend to enjoy prominent brand names and significant market positions that do not need a lot of ongoing support or attract much competition. The approach therefore allows Alliance to be highly profitable while minimizing risk.

The company has a highly diversified portfolio, consisting of 50 products gained through 21 acquisitions in 14 years. For the past six years, acquisitions have averaged two a year and sales have grown at an average compound rate of 22% annually. Meanwhile, the average return on equity has been good at 17% and average operating margins have been high at 22%. There is a dividend, too, which has increased from 0.3 pence per share in 2009 to 0.75 pence per share in 2011.

Currently, Alliance is trading at 23 pence per share, just 7% higher than its 52-week low. The P/E is 6.7, which looks very low to me given the aforementioned track record. The company has 13 million pounds remaining in its revolving credit facility and has announced plans of more acquisitions, which could further boost earnings. Analysts forecast sales of 44 million to 47 million pounds and earnings per share of 3.4 to 3.7 pence for the current year.

Rexam (427 pence/3.7 billion pound market cap)
(ISE: REX.L) is one of the largest packaging companies in the world. It makes cans for some of the world's most popular drinks groups, including Coca-Cola and PepsiCo.

Rexam is one of the three major players in a global packaging industry that boasts high barriers to entry. The firm is the largest drinks-can manufacturer in Europe (market share 40%) and South America (60% market share in Brazil), and the second-largest in North America (market share 20%). It is also a major player in plastic packaging for health-care and personal-care products.

Rexam is a durable, cash-generative company that paid above-average dividends for years. Due to an expensive acquisition in 2007, however, and the effects of the global financial crisis of 2008, Rexam suffered losses of 29 million pounds in 2009. It had to launch a rights issue to service debt and was forced to cut its dividend from 18.7 pence to 8 pence per share.

In the past two years, however, Rexam appears to have bounced back. Operations were streamlined to strengthen the balance sheet and reduce net debt to 1.4 billion pounds from 2.7 billion pounds in 2008. Rexam also plans to divest some parts of its plastics division and focus on its beverage-packaging business, which accounts for 80% of its revenues.

The dividend was raised from 8 pence per share in 2009 to 14 pence per share in 2011, and the group has made good on the commitment to re-establish dividend cover in the 2.0-2.5 range. Return on capital employed increased from 5% in 2009 to 10% in 2011, while earnings have jumped from 11.4 pence per share in 2009 to 36.3 pence per share in 2011.

What now?
So there you go, three stocks that look like they will do well over time. Of course, these suggestions are just a starting point for your own research. Whether or not these stocks are worth your time is your decision to make. Let me know your thoughts in the comments box below.

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At the time thisarticle was published Zarr Pacificador does not own any shares mentioned in this article.The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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