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.
Red is the new black
For commodity companies, their production growth and demand is almost wholly dependent on China. This holds true for copper producer Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), which has also suffered from negative investor sentiment over its decision to diversify its operations by purchasing oil and natural gas companies Plains Exploration & Production Company (NYSE:PXP) and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) for a combined $9 billion in cash and stock. Investors may not like the state of the copper market here, or be skeptical about Freeport’s big bet on natural gas, but I think the company set itself up for long-term success.
To begin with, China’s demand for copper is expected to remain robust, given its $157 billion infrastructure bill passed in September. Copper is a common component used in heavy construction, so the demand and copper pricing stability should be there. Let’s not also overlook the comments from Freeport’s senior vice president of marketing and sales (which I’ve highlighted before) in which he anticipates the company potentially doubling its copper exports to China up to 1 million metric tons by 2016. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is basically telling you not to worry about the demand side of the copper business.
As for its “questionable” natural gas purchases, with President Obama emphasizing a push toward cleaner-burning fuels and U.S. energy independence, I don’t think Plains Exploration or McMoRan Exploration will be struggling to find buyers of their fuel. The true gem of the two is Plains Exploration which combines onshore rigs in California — a spot where plenty of fossil fuels still lay trapped below ground — and offshore in the Gulf of Mexico.
Altogether, Freeport is a well-oiled profit-pumping machine valued at seven times forward earnings and paying close to a 4% yield. Sign me up!
Hardly what I’d call a short-circuit
One of the many dangers of investing in the technology sector is that many of the products can be easily commoditized and become quickly obsolete with the rapid tech replacement cycle of today’s products. That still didn’t predicate me from keeping my distance from printed circuit board, or PCB, manufacturer TTM Technologies, Inc. (NASDAQ:TTMI) .
On the surface, TTM looks like a disaster, with the company taking a huge non-cash goodwill and asset impairment charge of $218.4 million in 2012 and total sales falling 5.6% from 2011. But removing these one-time, non-cash charges and focusing on its sales strength in the smartphone and tablets printed circuit board segment, and you’ll discover an incredibly cheap company.