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3 Stocks Near 52-Week Lows Worth Buying: VMWare, Inc. (VMW), FirstEnergy Corp. (FE) and More

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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.

VMware, Inc. (NYSE:VMW)Clouded judgment
I know the market can sometimes be merciless around earnings time, but VMware, Inc. (NYSE:VMW) shareholders are still trying to get the license plate of the truck that hit them.

The cloud-virtualization specialist that I selected as one of the five best ways to play the upcoming investment boom in big data centers reported fourth-quarter results that outpaced estimates in the revenue and earnings column but came up well short of what the Street had been looking for with regard to first-quarter and full-year sales guidance. For the first quarter, VMware is forecasting just $1.17 billion to $1.19 billion in revenue compared to the $1.25 billion consensus estimate, with license growth projected at just 8% to 11%. EMC Corporation (NYSE:EMC) , which still owns 60% of VMware, was also slammed on the news and issued its own full-year sales forecast of $23.5 billion, which fell $100 million shy of estimates.

Still, the market for VMware looks promising even if more competitors are entering the cloud-virtualization playing field. VMware is pushing into other business ventures, as evidenced by its $1.26 billion purchase of Nicira last year. With an angle on networking equipment and, as my Fool colleague Anders Bylund points out, a cloud-based management solutions joint venture with EMC , VMware should be able to stabilize its growth prospects. With the fiscal cliff out of the way, we’re beginning to see tech spending tick up, and the transition to big data centers isn’t a matter of if for enterprises, just when it will kick into high gear. VMware is perfectly suited to handle this transition and looks like a screaming buy at current levels.

Time to flip the switch
If you’re looking for a way to keep investors from investing in a cash cow like an electric utility, FirstEnergy Corp. (NYSE:FE)‘s electricity-generating portfolio that relies on coal and nuclear energy is a good start. This isn’t to say that FirstEnergy doesn’t operate renewable energy facilities as well, because it does have hydroelectric, solar, and wind-generating capacity, but its reliance on coal and nuclear is much higher than that of its peers. With thermal coal demand down from the year-ago period, and natural gas prices coming in significantly cheaper than the equivalent cost of operating a nuclear plant, FirstEnergy has been put in a serious bind. Tack on the damaging effects of Hurricane Sandy, which wiped out power for numerous customers and resulted in costly repairs, and you have a layer of yellow caution tape a foot thick to dig through.

However, I think the time has come to flip the switch to “on,” as we’re seeing a stabilization in thermal coal demand as the first cold weather of the season sweeps across the United States. More important, President Obama’s call for U.S. energy independence gives me a strong inclination that, with nuclear power being a clean-energy source, we may see a subsidy from the government sometime in the near future to encourage nuclear production and build-out. FirstEnergy’s dividend yield of 5.4% is the fourth-highest among a total of 139 electric utilities and its forward P/E of 13.5 is well below the industry average.

About the only decision I will fault them for is paying for the naming rights to the Cleveland Browns’ NFL stadium (my apologies, Cleveland fans), but that’s a whole different ball game.

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