3 Stocks Near 52-Week Lows Worth Buying

3 Stocks Near 52-Week Lows Worth Buying

Just as we examine companies each week that may be rising past their fair value, we can also find companies potentially trading at bargain prices. 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 when the market reacts to the upside.

Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.

In real estate we trust
The threat of higher interest rates has been a real drag on much of the retail real estate investment sector since May. For one, higher interest rates make the prospect of borrowing for retail REITs much tougher since all new borrowing will come at a higher interest expense. Few retail REITs actually build their properties from the ground up, meaning takeovers that are funded by at-the-market share offerings and debt are the usual way these deals are financed. In addition, higher lending rates can make it difficult for tenants as well, putting modest pressure on occupancy rates.

This has been the primary plight of CBL & Associates Properties since early May. To add icing on the cake, CBL, which primarily operates malls in 29 U.S. states, has been struggling for years to bring down its leverage.

The good news is, we've seen improvement on all fronts in its second-quarter results. Funds from operations (FFO), a measure of cash flow from operations for a REIT, grew by 3.8% during the quarter as occupancy rates improved 70 basis points to 93% and debt-to-total market capitalization dipped to 52.1% from 55.9% in the year-ago period.

What particularly intrigues me about CBL is its geographic diversity. Many of CBL's malls are located in the Midwest, Ohio River Valley, South, and Southeast in states that generally fared better than the norm during the recession. What this tells me is that consumers in these areas are more resistant to fluctuations in the economy, which bodes well for CBL's occupancy rates and sales per square footage.

The final factor here is that as a REIT, CBL is required to pay out at least 90% of its earnings in the form of a dividend in return for favorable tax status. Based on CBL's forward yield of 4.8%, shareholders are going to get a U.S. Treasury bond-topping return by owning this stock. At what I consider a minuscule eight times forward earnings, I would strongly suggest giving CBL & Associates a closer look.

Nobody beats this stock... nobody!
As I just noted above, the prospect of rising interest rates means bad news for nearly every sector. One such sector that isn't going to be breaking out the Kleenex anytime soon, though, is the rent-to-own industry.

Comprised of Rent-A-Center and Aaron's , both companies will stand to benefit in a big way as furniture and other large electronic items are priced out of some people's budgets thanks to rising interest rates. Instead, these people/families will turn to lease-to-own programs such as those offered by these two companies, which come with considerably lower weekly payments but often cost more over the long run. The closer we move toward an imminent tapering off of the Federal Reserve's monthly bond-buying program, the more likely we'll see interest rates move closer to their historical average.

While I feel confident that both companies will continue to be successful, Aaron's looks like the better buy of the two based on a couple of key metrics. First, a direct comparison of future growth rates gives a slight top-line edge to Aaron's. Dividend-wise, Rent-A-Center's 2.2% yield handily trumps Aaron's 0.3% yield, but Rent-A-Center is no match when it comes to comparing its balance sheet to Aaron's. Whereas Rent-A-Center is lugging around nearly $800 million in net debt, Aaron's is sporting a net cash position of $113 million, giving it considerably better flexibility than Rent-A-Center.

At 11 times forward earnings and with a favorable long-term business trend outlook, I'd say that nobody is going to beat Aaron's in the rent-to-own market... nobody!

Rolling the Dice
The markets may look a bit choppy, but there's little mistaking that the jobs picture is slowly improving, at least if you go by the headline figure. As of the most recent jobs report, the U.S. unemployment rate had dipped to 7.4%, its lowest level since December 2008. However, this figure masks an underlying problem with most job creation in 2013, namely that it's part-time in nature.

With few businesses willing to gamble on full-time employment and the coming enactment of the employer portion of the Patient Protection and Affordable Care Act in 2015, we've witnessed 77% of all new jobs created up until July to be part-time. While I'm certain some people are thrilled to find any form of work, many are being underutilized, which is proving the perfect opportunity for job-seeking websites like Dice Holdings to shine.

Dice's job platform allows employers and recruiters to seek out displaced workers for a monthly service charge. Its top revenue-earning engine is its Dice.com portal, which helps employers find out-of-work technology and engineering workers. As of the end of June, Dice had 8,650 total recruitment package customers with its other sites aggregating to an additional 3,550 customers. This may not sound huge, but it's propelling Dice to annual top-line growth of 6%-8% and has allowed the company to build up a small but growing net cash position.

What really intrigues me with Dice is the potential opportunity for a takeover. Now understand this is purely opinion on my part, but I feel Dice would make the perfect takeover target for LinkedIn . Surprised I didn't say Monster Worldwide? The problem with Monster is it doesn't have the cash to pull the deal off, and I don't see any need for Dice to stoop to a merger of equals when it's clearly holding its own, which is much more than I can say for Monster Worldwide! LinkedIn is looking for new niches to solidify its job search domination and Dice's clearly defined job sectors will fit that need. To add, LinkedIn already has more than enough cash ($873 million as of last quarter) to make the deal happen, with no debt.

Could Dice succeed without a buyout? I believe so! But one way or another, I project a suitor will come knocking on Dice's door before 2015.

Foolish roundup
This week's theme is all about finding three undervalued companies that have succumbed to macroeconomic concerns, but have the business model and balance sheet to succeed. While CBL could certainly improve its situation by paying down some of its debt, Aaron's could work on boosting its paltry dividend and Dice could focus on reducing the uncertainty of revenue stream. These are all minor concerns if you dig deeper and look at the big picture for all three businesses.

I'm so confident that these three names will bounce off their lows that I'm going to make a CAPScall of outperform on each one.

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The article 3 Stocks Near 52-Week Lows Worth Buying originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends and owns shares of LinkedIn, Google, Facebook, Amazon.com, and Apple. 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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