Apache Corporation (APA), EOG Resources Inc (EOG): Three 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.

Apache Corporation (NYSE:APA)Swimming in liquid assets
After a multi-year downtrend, the time has finally come to pull the CAPS trigger on diversified oil and gas exploration and production company Apache Corporation (NYSE:APA) .

My Foolish colleague Paul Chi has been optimistic on Apache Corporation (NYSE:APA) for quite some time — even purchasing it in the Street Fighter portfolio that he and fellow Fool Matt Argersinger co-manage. One of the driving forces behind their buy recommendation is the simple fact that a majority of Apache’s revenue comes from liquid assets (oil and liquefied natural gas). Only 11% of Apache Corporation (NYSE:APA)’s 2012 revenue was derived from natural gas sales, exposing it to far less realized price fluctuations than its peers.

In addition, Apache Corporation (NYSE:APA) has reserves in the highly sought-after Permian Basin and offshore in the Gulf of Mexico. These regions are well known for their high abundance of oil reserves, and work perfectly to shift Apache’s production to a liquid-heavy business. Furthermore, Apache Corporation (NYSE:APA) has been utilizing the same “trick” that EOG Resources Inc (NYSE:EOG) has been using: namely, shipping its Permian Basin oil by rail to Louisiana instead of Cushing, Okla., where it receives a premium Brent crude payout. With Cushing only paying out at West Texas Intermediate prices, EOG Resources Inc (NYSE:EOG)and Apache can pay to ship their oil to Louisiana terminals and still collect a higher margin even after shipping fees. According to Paul, 72% of Apache’s total oil production is sold for a higher price point that the current WTI price.

I’m not anticipating that oil will be getting much cheaper anytime soon; so at seven times forward earnings, I’d suggest digging deeper into Apache Corporation (NYSE:APA).

Looking offshore for success
Sticking with the theme of oil and gas for a moment, let me also turn your attention to W&T Offshore, Inc. (NYSE:WTI) which, just like Apache, holds assets onshore in the oil-rich Permian Basin, but has a substantial chunk of assets offshore (roughly 1.2 million of its 1.4 million leased acres) in the Gulf of Mexico.

Admittedly, one aspect that had kept me from diving into W&T Offshore earlier had to do with its big capital expenditures budget and its already high debt load. With capex surpassing expectations last year and the company carrying about $1 billion in net debt, there were plenty of reasons to be cautious following the ATP Oil & Gas Corporation bankruptcy. However, plans for a reduced capex budget in 2013, as well as the completion of numerous drilling and well improvement projects, should mean the convergence of big profits for W&T Offshore in 2013.

W&T also has struggled under the weight of weak natural gas prices. According to the company’s own reserve estimates, it holds 60% in liquids and 40% in natural gas. Quietly, though, natural gas prices have doubled over the past year, all while W&T’s share price has been nearly halved. W&T is making all the right moves in terms of boosting oil production and being smart about its acreage acquisition… it’s just not being given any credit.

I’ll stick my neck out for W&T Offshore this year on the expectation that its costs come in below expectations and profits soar well beyond the Street’s forecast. If oil and natural gas prices stay consistently where they are now, I’d call W&T a bargain at 10 times next year’s profit projections.

Chemical reaction
The disappointments are starting to mount for investors in OMNOVA Solutions Inc (NYSE:OMN), an emulsion polymer and specialty chemicals maker that has missed the Street’s estimates in worsening fashion for three straight quarters. Its first-quarter results, released earlier this month, showed a 9% decline in total revenue from the year-ago period because of lower volumes in Europe and India, and business seasonality. However, optimistic contentions could also be made based on this same earnings report.

For one thing, OMNOVA Solutions Inc (NYSE:OMN)’s growth prospects appear very strong in Asia, where its chemical business tied to the oil industry looks poised to explode higher. Even with GDP growth of “just” 7.7%, China is committed to finding and exploiting new energy sources, meaning OMNOVA’s products should remain in high demand. Elsewhere, OMNOVA is poised to boost production with additional global manufacturing facilities coming on-line later this year. Additionally, OMNOVA will benefit from domestic and Chinese home and commercial construction because of its roofing and construction applications.

OMNOVA has remained profitable despite its recent EPS misses and continues to produce meaningful cash flow to drive operational expansion. At eight times forward earnings, even with a recent rash of earnings misses, I think the reward potential easily outweighs the risk.

Foolish roundup
This week’s theme is all about “How bad can it really get?” For the two oil and gas explorers and producers, I feel investors are paying too much attention to their previous spending habits and not enough attention to their production growth potential. For OMNOVA, it’s all about servicing the right industries at the right time — and I feel it’s well-positioned to accomplish that.

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 owns shares of Apache.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!