For some, it is a small-cap pharmaceutical company that manages to strike gold with a new drug. For others it may be a boring old retail company that was snapped up at a cheap price and ridden for years of outstanding gains. Whatever shape or form a home run stock pick happens to come in, the end result is almost always the same - a single pick transforms a losing portfolio into a winner.
Buy Like Buffett
Even the success of legendary investor Warren Buffett and his holding company, Berkshire Hathaway (NYSE:BRK.A, BRK.B), has been primarily derived from a handful of outstanding stock picks. Buffett's decisions decades ago to buy massive numbers of American Express (NYSE:AXP) shares in the wake of the salad oil scandal that had depressed the stock's price, and his long-term investments in outstanding companies such as Coca-Cola (NYSE:KO) have been the driving force that powered Berkshire Hathaway to market-beating returns for many years.
What is most interesting about those types of home run stock picks is that anyone could have easily made the same decisions and invested heavily into those stocks as well. All that was required to capitalize on those opportunities was a keen eye and a willingness to bank on companies that the rest of the market was selling off.
With that in mind, here are five established companies that have been sold off by the market recently to near 52-week lows, but are also expected to produce positive earnings per share (EPS) in the current fiscal year and trade with relatively cheap forward P/E ratios.
| Company |
Forward P/E |
Market Cap |
|
Barclays plc (NYSE:BCS)
|
7.11
|
$39.0B
|
|
Bunge (NYSE:BG)
|
7.79
|
$11.0B
|
|
Ingersoll Rand (NYSE:IR)
|
9.71
|
$11.9B
|
|
Manpower (NYSE:MAN)
|
8.99
|
$3.9B
|
|
Tempur Pedic(NYSE:TPX)
|
9.18
|
$748M
|
| Data as of market close August 26, 2008 |
Ingersoll Rand Company
The New Jersey based maker of industrial equipment has almost certainly seen better days. Its stock is trading near its 52-week low as evidenced by this chart, despite coming off a decent second quarter.
For the period ended June 30, excluding certain costs, Inrersol would have earned $1.03 per share from continuing operations. These are solid earnings considering that the investment community had expected 88-89 cents per share.
The company's latest earnings guidance is worthy of notice. For the full year 2008, earnings from continuing operations are forecast to be $3.80-3.90 per share. Analysts only expected earnings per share of $3.82. The company is currently expected to earn $4.31 per share in 2009. As a bonus the shares pay a dividend; the current yield is 2%.
The downside is that tax-loss harvesting could be a concern. In addition, a prolonged economic slowdown could prove to be a negative for the company as well.
For more on tax-loss season, check out Selling Losing Securities For A Tax Advantage.
