After what has been a bloodbath for the S&P/ASX 200 (Index: ^AXJO)(ASX:XJO) this week, investors are confronted with a plethora of cheap stocks.
Picking the treasure from the trash is not as easy as it looks however, with some of this week's falls well deserved.
Here's what you need to know about Ardent Leisure Group (ASX: AAD), Bega Cheese Ltd (ASX: BGA) and UGL Limited (ASX: UGL).
Ardent Leisure Group – last traded at $1.96, down 19% for the year
Ardent Leisure has had a rocky six weeks, with two major falls in its share price since the start of February.
The first, covered by Brendon Lau, occurred when Ardent disappointed investors with its first-half results. Ardent fell over 13% to ~$2.40.
After steadily declining, shares dropped another ~20% over the past two days to their current price of $1.96. This fall was due to the resignation of Ardent's CEO, who held the position since 2002.
A new CEO always brings a few question marks but such a major decline in prices for an otherwise great company suggests that there could be an opportunity here for the right investor.
Bega Cheese Ltd – last traded at $4.69, down 13% for the year
After a year of ups and downs, Bega has headed firmly down after recent half-year results saw a major decline in profit after tax, predominantly due to a decline in global milk commodity prices.
Dividend payouts were maintained, but management indicated there would be a decline in full-year profit from last year's $29.7m result.
I am cautious about the decline in profit and would be waiting for full-year results or substantial falls in Bega's share price before considering a purchase.
(You can find Ryan Newman's full coverage of Bega's most recent results here)
UGL Limited – last traded at $1.49, down 47% for the year
I wrote about UGL's poor prospects a couple of weeks ago, when its half-year report was released.
At that time I pointed out that UGL would face increasingly fierce competition from a shrinking pool of work, with no relief in sight as investment in Australian resources projects is at its lowest point in over a decade.
Since I wrote the initial article, UGL has shed another $0.50 and continues to look a poor investment. While its low Price to Earnings (P/E) ratio may look appealing, it is not a bargain buying opportunity.
The same goes for UGL's competitors Titan Energy Services Ltd (ASX: TTN), Ausdrill Limited (ASX: ASL), and Monadelphous Group Limited (ASX: MND), all of whom have also been smashed this week.
Simply put, there are better stocks out there with far lower risk and substantially better dividend and growth prospects.
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