by Will Ashworth | June 13, 2014 3:12 pm
Sometime last week, I happened to see a quick blurb that eBay (EBAY) was trading within 5% of its 52-week low.
I did a quick screen courtesy of FINVIZ looking for stocks to buy in the U.S. — anything trading within 5% of its 52-week low and possessing a minimum market cap of $300 million. When stocks start to fall that low, it’s usually a good bet that some are hitting oversold territory. If so, they make great stocks to buy for the rebound.
A week ago, 31 stocks met my criteria. By today, the selection of stocks to buy had increased to 52, making my job a heck of lot easier. Seven different sectors had at least one stock trading at low levels. Here are three stocks that have fallen hard in the past year, but are poised for a rebound:
When it comes to healthcare companies, there was only stock that met our criteria, but it has a lot going for it. IPC The Hospitalist Company (IPCM) has arguably the worst name in the healthcare business. However, if you’re able to get past its name, IPCM delivers solid revenue growth and profits.
IPCM has approximately 2500 hospitalist providers in the U.S. These doctors work with 39,000 primary care physicians who refer patients to the company when they are in need of a hospital care physician. Needless to say, malpractice is a part of its business reality. However, something unrelated to doctor care has contributed to IPCM stock spiraling lower.
In December, the U.S. District Court for the Northern District of Illinois lifted the seal on a case involving Medicare and Medicaid claims made between Jan. 1, 2003, and June 10, 2010. The case is investigating “potential breaches of fiduciary duties by certain officers and directors at IPC The Hospitalist Company.”
There are 13 states involved in the investigation, and it’s unknown what this will do to the company’s financial position. But it has already had an effect on IPCM stock, which is down more than 30% since the lifting of this seal.
Since February 2011, IPCM stock has traded below $40 on only three occasions. And even then, the dips usually lasted a few months. With management continuing to acquire new practice groups across the U.S. while upping its emphasis on recruiting, IPCM stock looks to be undervalued, despite the legal uncertainty hanging over its head.
Once owned by Lockheed Martin (LMT), NeuStar (NSR) was spun off to private equity interests in 1999 on neutrality concerns between it and COMSAT, a global telecommunications company that LMT acquired the same year.
NeuStar does a lot more than its original mission, which was to handle number portability for individuals wishing to change telephone service providers. Now it also provides marketing, data and security services to industries other than telecom.
In 2014, NSR stock has dropped 52% year-to-date. One reason for the drop is a four-cent earnings miss from its Q1 report in April. More recently, it has been losing ground because of a leaked email that suggests it will lose some business to Ericsson (ERIC).
Neustar has made no attempt to alter its adjusted EPS outlook for 2014, which currently sits in a range from $3.64 to $3.80. I don’t care how big this lost contract is, I highly doubt it’s worth a 50% haircut. For this reason, NSR makes our list of gutted stocks to buy.
Right now, you can buy Bed Bath & Beyond (BBBY) for nearly the same valuation as Staples (SPLS), which is insane, considering how much better BBBY’s business is. BBBY’s enterprise value is 6.2 times EBITDA, compared to 4.8 for SPLS.
Bed Bath & Beyond has absolutely no debt, almost a billion dollars in cash and is still growing, albeit at a slower pace than in the past. In 2014, it expects mid-single-digit EPS growth which would mean delivering above $5 for the first time in its history. With BBBY stock sitting just above $60, we’re talking about a price-to-earnings ratio of 12, far less than many of its home furnishing peers.
In early January, I covered the aftermath of its Q3 earnings report. I came to the conclusion that BBBY stock was taking a breather and was even possibly headed for a bit of a decline. Since then, it’s down 13.3% which makes me think the worst is over. That doesn’t mean there won’t be any more bad news in the near future or further declines in its stock price … but it does suggest that BBBY is one of the better values available in retail at the moment. In terms of gutted stocks to buy, BBBY is one of the best options out there.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.
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