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3 stocks near 52-week lows: Are they bargain opportunities?

Many Foolish investors like finding bargains, but what are some ways to find them?

They could be located by a low price-earnings ratio or low price-to-book ratio, but the one common denominator in both cases is a low share price. Low prices can make dividend yields rise. Also, looking at stocks near their lows can be a good way to locate stock picks.

In fact, low prices are what you should wish for as you are building a position in a favourite stock pick. The lower, the better. But many investors are drawn to high prices because they indicate “success”. Remember, though, the lower the price you pay, the higher your eventual return can be.

Here are three stocks that have hit or are near new 52-week lows. Have they been sent down for a good reason and could they be in bargain territory now?

—  Fortescue Metals Group Limited (ASX: FMG)

The third-largest iron ore miner in Australia ended last week with a new low of $3.86 when iron ore prices slid to a new five-year low. The company is much better insulated from lower prices than it was in 2012. However, with a break-even price in the low US$70/tonne range, the current US$83/tonne spot price could constrict potential earnings. It is not looking so good unless spot prices firm up.

—  JB Hi-Fi Limited (ASX: JBH)

The electronics retailer had a solid 10% rise in full year net profit, but the market was concerned about its growth outlook, especially in light of weaker iPad and tablet PC sales. Well, the answer to that may be the new iPhone 6 and the Apple Watch which were released this week. Many new features and mobile payments for the Apple Watch could spur sales (Apple is good for that). Current low prices could be a bargain now before any Apple related revenues make their way through to JB Hi-Fi’s earnings.

—  AGL Energy Ltd (ASX: AGK)

The integrated energy company had a 3.9% drop in full year underlying net profit for FY 2014. It plans to acquire Macquarie Generation, a power company that generates about 13% of electricity used in the eastern states, but it won’t be cheap. The company plans a capital raising of $1.2 billion. Its earnings are expected to rise in FY 2015 on the back of this acquisition, but how much earnings per share will be diluted by the raising needs to be seen.

Of these three, I would prefer JB Hi-Fi because of potential Apple related product sales. That kind of tailwind can be good for business. Tech products and services are in high demand. Like wearable tech and cloud computing.

In fact,  The Motley Fool has just released a special video report on our analysts’ #1 ASX tech pick -– all about the one Australian company poised to win big from the ‘cloud computing’ trend. (Hint: The shares are already up over 100%!) Click here to claim your FREE copy.

But if you like something simpler to understand that still has solid dividends and potentially good earnings growth, then you will want to find out about the company The Motley Fool has made its #1 pick for 2014-15. Simply click here to find out which stock we rate to have a great end to the year.

 

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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