Shareholders in some well known and widely-owned companies have watched their share prices sink to new 52-week lows recently. It's a bitter pill to swallow and for some investors it's more pain than they can take, leading them to sell.
Unfortunately this is almost always the wrong moment to sell.
Instead of selling and turning a paper loss into a real capital loss, investors need to focus on the underlying economics of the businesses in their portfolio and determine a conservative appraisal of their value. If the price remains above their calculation of value then they should keep holding the stock.
The following three companies have all recently touched new lows and while the timing of a rebound would be nothing more than a guess, the potential for a rebound at some point in the future looks pretty good.
The share price of oil and gas major Santos Ltd (ASX: STO) touched $12.90 this week which is a level not seen since July 2013. Despite providing negative returns to shareholders over the past one and five years, the future is looking bright for shareholders thanks to the massive exposure the group has to LNG projects.
Add to that consensus estimates which suggest the stock is trading on a FY 2016 price-to-earnings ratio of 13x and dividend yield of 4.5% and there are reasons to expect a bounce back in price.
Maca Ltd (ASX: MLD) is a contractor of mining and civil engineering services. The company obviously operates within an industry that is facing headwinds, however, a number of brokers have share price targets which are significantly above where the stock currently trades.
AGL Energy Ltd (ASX: AGK) recently completed a rights issue to help fund its acquisition of electricity generation firm Macquarie Generation. The offer of shares was priced at $11 which was appealing for shareholders as the stock was trading around $14 at the time. With a commanding position in the Australian energy market, blue-chip status and trading on a forecast PE of 14x and a yield of 4.8%, shareholders will likely see higher prices for AGL in the future.