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2 popular companies at 52-week lows: Should you buy?

Long-term readers will be aware that these ‘52-week low’ articles are a regular fixture at fool.com.au, generally I try to keep them focussed on solid buying opportunities rather than shares to avoid.

Because let’s face it, knowing which shares not to buy is all well and good, but it doesn’t move you a single step closer to actually making money with your portfolio.

Last week’s article was about two of the most outstanding value opportunities on the ASX at the moment – companies I’ll be buying as soon as my monthly Fool pay-check rolls around – but today’s focus is on shares that investors should consider a lot more carefully.

BC Iron Limited (ASX: BCI) – last traded at $2.33, down 45.5% in the past year

First of all let me say that BC Iron is a very promising company. I have owned it previously and it delivered stellar returns to investors in 2012-2013.

I will be one of the first investors to return to it when I think the iron ore situation recovers, however wider macroeconomic conditions do not make it an appealing investment at the present.

Do not use last year’s report as an indicator of potential success this year!

BC Iron’s average iron ore price received for its product last year was substantially higher ($106/tonne) than prevailing iron ore prices at the moment.

Falling iron ore prices are also getting perilously close to the company’s predicted total costs of $60-68/tonne in 2015.

With iron ore prices recently hitting five-year lows and expected to drop further, I think it is highly likely that BC Iron will report reduced profits and dividends in FY2015, as well as experiencing further falls in the value of its shares.

AGL Energy Ltd (ASX: AGK) – last traded at $13.57, down 11.1% in the past year

After announcing a 1-for-5 renounceable rights issue last week, shares in AGL Energy have trended down towards the issue price of $11.

The funds raised through the rights issue will fund AGL’s acquisition of coal-power producer Macquarie Generation, a purchase expected to add $75 million (around 13.3%) to underlying profit in 2015.

However the shares issued will actually increase the number of AGL shares on issue by around 16.6%, which means that earnings per share may shrink in FY2015.

This won’t matter for existing shareholders who can take advantage of $11-a-share prices and thus enjoy proportionally greater yields, but new investors need to consider at what price AGL becomes an outright ‘buy’ for them.

If that sounds too much like hard work, investors could instead take a look at The Motley Fool’s Top Stock recommendation for 2014; a share I already own, and one I think you might like to have a look at too.

The Motley Fool’s done all the leg-work for you on this one, and distilled the research down into a clear and concise report on exactly why you should buy and hold this promising small-cap stock for the long term.

If you’re interested, simply click on the link below and enter your email address – it takes less than 30 seconds – and we’ll send it to you, completely FREE!

Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now

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Motley Fool contributor Sean O'Neill doesn't own shares in any company mentioned.

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