UltimateAnalyst (95.95)

5 Star Stocks at 52 week lows

February 22, 2009 – Comments (2) | RELATED TICKERS: BAS , NTE

            When the market collapses, a variety of opportunities are uncovered for value investors to seize upon for a long term gain.  Right now, the market certainly has suffered bouts of pessimism.  Among the pummeled stocks are two that have reach 52 week lows, yet they still hold the much coveted five star caps rating.  These two companies are Basic Energy Services and Nam Tai Electronics.

            The chart below illustrates their Market cap, ROE, PE, and Debt to Equity ratios. 

Company               

    Market Cap           ROE      P/E       Debt to Equity         

Basic Energy Services    285m143.4.79

Nam Tai Electronics160m15.82.6.02

The very different companies both have some common factors.  For starters they both currently trade at nearly their 52 week low.  Next they both have strong balance sheets and financial ratios.  Earnings have been fairly good, although both have been severely affected by the current economic condition.

            As Buffet recommends, it is crucial to buy companies when others are pessimistic because now is the time to snag great values.  These two stocks are definitely bargains at this point. They may not be instant successes but in the long term these companies look excellent.

            Basic Energy Services (BAS) is in the business of supplying oil and gas exploration companies with equipment and well construction.  If a company found oil or natural gas, this company could come in and install equipment to process the oil and pump it out of the ground. It enjoyed an excellent third quarter with revenue of 277 million coupled with net income of 25 million. 

            BAS maintains a fairly strong balance sheet with 80 million in cash and 113 million in current liabilities.  Debt total 472 million, but more than 400 of it is long term and should not pose a serious threat to the company.  Cash flow has grown through the past three years and solid management seems to take care of the company.

            Looking to the future, BAS still has a good market share, but they projected an 11% decrease in revenue for the fourth quarter over the third quarter’s revenue, slightly below analyst expectations.  Even with the drop in revenue, the company has good efficiency and should remain profitable.  Waiting for the earnings report on February 26th is probably a safer way to get into the company.

            Separate from BAS is Nam Tai Electronics (NTE).  NTE is a telecommunications company that creates lcd screens, flexible printed circuits, Bluetooth headsets, and components for notebook computers, cameras, toys, and video games.  The variety of its products allows for more diversification than some corporations, although it has strong competition in many of its lines.

            In its fourth quarter, announced February 9th it lost 14 million with lower sales.  It also had 17.3 million losses from goodwill impairment.  Although earning were disappointing, its past history of success even in difficult markets demonstrates its ability to thrive.  NTE has an excellent balance sheet with 237 million worth of cash, so currently you could get NTE for less than its total cash position.  Debt does not truly hamper the cash position with only 8 million in total debt.

            The current financial crisis cannot last, but these companies are not necessarily slaves to the crisis either and could make could investments even if we have not yet reached the bottom. With BAS only dropping slightly in revenue and NTE trading below its cash position, there is little wonder that there are excellent opportunities available.