I've recently begun writing a weekly article on ASX stocks hitting new 52-week lows. It's fascinating to see when and why shares get dumped, and the investor in me loves the bargains that pop up.
Usually the shares are there because they deserve to be, with negative announcements driving away investors and sending the share price plummeting. Sometimes shares drop in value for no reason, with a lack of media coverage seeing them languish, forgotten. Often these forgotten shares can deliver the best returns, as strong results suddenly attract a lot of investor interest.
Some shares will recover their previous strengths as continuing performance attracts investors. For others, their 52-week low will be their new 'normal' for the foreseeable future.
In the past three weeks, I've seen three of the best opportunities on the ASX at the moment flash past my computer screen. They're cheap, have great potential, and are still being neglected by the market.
One of them, The Reject Shop (ASX: TRS) saw its share price drop nearly 50% in the face of financial shenanigans from two banks after a mediocre half-yearly report. Coca Cola Amatil (ASX: CCL) has had a long bumpy road to the bottom since its November trading update, and is trading within a hair's breadth of its 52-week low. Clothier Oroton Group (ASX: ORL) has picked up nearly 15% since its 52-week low, but is still one for the watch list.
The Reject Shop investors seemed to be most disappointed with a decreased profit figure, which was entirely due to the cost of new store openings and absence of a $2 million insurance payout The Reject Shop received last year. It's crazy to think that investors sold out when greater revenue will lead to proportionally greater earnings per share next year once the cost of new stores is removed. There is also plenty of potential for growth by expansion as well. At ~$10 apiece, shares are still down some 42% on their previous highs.
Coca Cola Amatil's demise was well heralded by the media after the SPC Ardmona write-downs, but the business looks to be considerably glossier than its coverage would indicate. After some fortunate intervention from Australia's two grocery giants, SPC Ardmona looks likely to break even, saving money that can be used for Amatil's beer and overseas soft drink expansions.
Some 250 million potential consumers live in Indonesia, Coca Cola's next market, while our domestic craft beer market continues to grow. Barring any unforeseen events, Coca Cola looks pretty certain to grow its earnings over the coming years, and you can bet your bottom dollar that its share price won't stay at these levels forever. At $11 each, Coca Cola Amatil sits only 12c above its 52-week low. Don't miss out!
Finally I come to Oroton Group, whose share price began to look rather sad after the departure of Ralph Lauren from the stable last year. Oroton has since partnered with Brooks Brothers, creating a joint venture for a move into Hong Kong and China. I am very bullish on China's future demand for services and retail, and Oroton's expansion is a step in the right direction.
I don't consider it quite the time to buy just yet – I'm waiting for another half-yearly report or two to measure Chinese success – but it is definitely one for the watch list. Its most recent half yearly announcement was encouraging and if you want to jump in while it's still trading at a 43% discount, go right ahead.
Foolish takeaway
I have no doubt that future weeks will see more bargains, and more crash and burn stories. Missing these three will only see more opportunities open up further down the line. Check out future 52-week low articles for some more goodness, and until then, invest Foolishly.
