5 Stocks That May Be Bottoming Out
The market may be nearing all-time highs, but there are still too many companies staring at the floor instead of the ceiling these days.
There were 82 stocks on the New York Stock Exchange that hit fresh 52-week lows last week. Another 74 Nasdaq-listed companies hit new lows.
Bucking the bullish trend over the past year is well earned in most -- but not all -- cases.
Let me go over five names that clocked in with new lows last week that I think may be ready to turn the corner.
Last Week's Low
Tennis balls bounce back, even though eggs don't
Let's start at the top with Renren.
China's leading social networking website operator doesn't get a lot of respect. The dot-com speedster went public at $14 two years ago, but it has been largely downhill from there.
Renren isn't profitable, and that's a problem. Analysts don't see it turning a profit until next year at the earliest. However, it's still hard to ignore growth. Wall Street sees revenue climbing 42% when Renren reports its quarterly results in two weeks, and those same pros see revenue accelerating to 43% in 2013.
China isn't going to shut down the Internet, but it will continue to reward local players that play by the rules. That's good news for Renren, which is already ahead of the curve by requiring real-name registrations.
BJ's Restaurants is one of the faster-growing eatery chains out there. You don't have too many restaurant chains growing at a double-digit clip, but that's because BJ's is still early in its expansion cycle.
If you've never been into a BJ's, it's a casual-dining experience. The specialties are deep-dish pizzas and brews, though my youngest son would argue that it's the funny face fries that come in the kids meals.
BJ's has been a disappointment lately. It failed to beat analyst estimates in each of last year's four quarters. Even now, few may argue that BJ's is cheap at 25 times this year's projected profitability. However, once investors get past the fears that casual dining will crumble in the wake of this year's expiration of the payroll tax rebate, BJ's will be appreciated again.
Linn Energy is one of the country's largest independent oil and natural gas development companies. Despite its healthy 7.5% yield, investors are getting nervous.
Linn Energy doesn't stand still. It made $2.9 billion in acquisitions last year, and it already topped that this young year with the $4.3 billion proposed purchase of Berry Petroleum. All of these deals make investors wonder if Linn is taking on too much at a time when it can barely cover its dividend.
However, Linn's opportunistic nibbling should pay off as the economy continues to improve and the consumption of oil and natural gas intensifies.
Ebix was rocked last week, but now it's fighting back.
Shares of Ebix rose 8% yesterday after it hosted a conference call that addressed many of the concerns raised last week when a bearish research report questioned the company's accounting practices.
Ebix provides enterprise solutions for the insurance industry. Its accounting may seem uncomfortably aggressive, but the company claims that it's doing everything by the book. The one thing about Ebix is that the stock was beaten down last week to the point where it's trading at an earnings multiple in the single digits even though it's growing faster than that.
Finally, we have VMware. I pointed out how BJ's failed to beat analyst profit estimates in any of last year's quarters, but VMware has actually beaten Wall Street's income targets every single period. You don't often find companies surpassing expectations only to hit new lows, but VMware's kryptonite is its valuation.
VMware has been a market darling until recently as the poster child for virtualization. VMware's growth has been explosive, but even now the stock is trading at a robust 23 times this year's expected earnings.
VMware didn't do itself any favors last month when it warned that it would only grow at a 15% clip -- with single-digit growth in licenses -- this year. However, as the stock reaches a more compelling valuation, it's hard to resist the virtualization darling.
Keep reaching for the stars
I know I won't be right on many of these. If the market weakens further, there's little to stop these companies from hitting even fresher 52-week lows down the line.
However, these five stocks are attractively priced right now. Somebody has to call bottom -- so why not me?
If you'd like to know more about the "Facebook of China," The Motley Fool has published a premium report on Renren, giving you a rundown of its opportunities and threats. The premium research comes with a year's worth of updates. Just click here to get started.
The article 5 Stocks That May Be Bottoming Out originally appeared on Fool.com.Longtime Fool contributor Rick Aristotle Munarriz owns shares of Ebix. The Motley Fool recommends BJ's Restaurants, Ebix, and VMware. The Motley Fool owns shares of BJ's Restaurants, Ebix, and VMware. Try any of our Foolish newsletter services free 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 a disclosure policy.
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