Fortescue Metals Group Limited, Santos Ltd and Virtus Health Ltd hit new 52-week lows: Is it time to buy?

With the ASX notching up its fourth straight loss on Thursday, there is a growing list of stocks hitting new yearly lows.

On Wednesday, the share prices of 62 companies hit new 12-month lows. Thursday was just as bad with 61 companies posting new lows!

Amongst the companies notching up record lows were Fortescue Metals Group Limited (ASX: FMG), Santos Ltd (ASX: STO) and Virtus Health Ltd (ASX: VRT).

While there is every chance that these three stocks could post fresh new lows, for long-term investors who are focussed on the sustainable earnings power of a business, the current share prices may offer appealing entry points…

As I explained here, when it comes to investing in resource stocks such as leading iron ore miner Fortescue the key is to own the lowest-cost producers. While Fortescue may not enjoy the title of lowest cost, as the world’s fourth largest producer of iron ore, the group has significant scale and in FY 2014 it achieved a total delivered cost to customers of US$56 per dry metric tonne. With iron ore holding around the US$75/tonne level, Fortescue is still a seriously profitable company.

The price of Brent oil slipped another US$2.02 yesterday to just US$78.36 per barrel. The decline in price of the “black gold” is weighing on oil and gas producer Santos with the stock down to a new 52-week low. While most investors view Santos as a gas play, particularly with its significant LNG assets entering the production stage, it does still receive around 20% of its total volumes from crude oil production.

At $7.21 leading IVF service provider Virtus’ share price is still well above its June 2013 offer price of $5.68, but it is also a far cry from the $9.20 level that shares were trading hands at this time last year. There has really been nothing but good news from the company since its IPO with expansion into Ireland and Asia key positives. Arguably the shares were overvalued near their 52-week high, but now at these levels, given the group’s market-leading position and the defensive and sustainable qualities of its business and international growth opportunities, the stock appears much more attractively priced.


Sometimes stocks trading at new lows can turn out to be bargains. Investors with an understanding of the supply and demand dynamics and long-term pricing of commodities such as iron ore and oil may view the current levels of Fortescue and Santos as attractive entry points. Meanwhile, with Virtus now trading below the market’s forward multiple, this quality stock looks increasingly appealing.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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