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.
Nowhere to go but up
Some might look at the natural gas sector right now and see few positives with natural gas rig counts at their lowest levels in 14 years, natural gas prices still well off their highs, and natural gas stockpiles remaining relatively high. As for me, I’m an optimist, and I see the glass as half full with nowhere for the sector to go but up from here. That’s why an infrastructure company like Spectra Energy Corp. (NYSE:SE) looks like a steal at these levels.
Another factor investors often overlook is Spectra’s joint-venture ownership in DCP Midstream Partners, LP (NYSE:DPM) with Phillips 66 (NYSE:PSX). DCP is a natural gas processing, transporter, and seller (as well as the largest natural gas liquids producer in the U.S.), and is able to fund its growth entirely through its own cash flow. With neither parent company having to devote its own precious capital to DCP’s expansion, Spectra Energy Corp. (NYSE:SE) has been able to focus on bolstering its own dividend, which now sits at a handsome 4.2% yield, and expanding its own transportation network.
Spectra is a smart play for America’s energy independent future!
Pedal to this metal
When consumer confidence is falling, taxes are rising, and growth is stagnant, it can often be difficult to locate investments which have the opportunity to outperform both as a hedge in a downtrending market and in a rising market as well. Silver, specifically through the iShares Silver Trust (ETF) (NYSEARCA:SLV), gives investors just that opportunity. This ETF invests directly into silver bullion and not any underlying companies, so you’ll get a pretty close dollar-for-dollar return to the spot price of silver.
There are quite a lot of reasons to like silver with the shiny metal nearly 50% off of its all-time highs. To begin with, it’s a common hedge investment, which wouldn’t be a bad idea to consider with the S&P 500 teetering near an all-time high. Silver also has plenty of practical applications, specifically in electronics. As long as technology demand remains high for new gadgets — and who’s to say it won’t — silver demand to Asia will continue to boom. There’s also a huge perceived value factor between silver at less than $29 per ounce and gold valued at nearly $1,600 per ounce. If you’re looking for a possible downside hedge, I’d suggest you dig a bit deeper into this ETF.
