'New lows list' offers a few gems
Where can you find stock-market bargains?
One place to look is the “new lows list,” which is a daily list of stocks that are selling at their lowest price in the past 52 weeks. Stocks that are out of favor and scorned by investors can sometimes be excellent picks.
Over the years, beginning in 1998, I have written 18 columns recommending a few stocks from the new lows list. This is the 19th.
On average, my bottom-fishing recommendations have achieved a 20 percent return over three years, compared to 10.1 percent for the Standard & Poor's 500 Index. Three-year results can be measured for 15 of those columns.
One-year results, however, are not as good. In a one-year time frame, my picks have averaged 6.6 percent, trailing behind the 8.5 percent for the S&P 500. The one-year measurements are available for 17 columns.
This suggests that if you want to troll for bargains on the new lows list, you'd best be prepared to wait a while for a company's fortune to turn or for the public's perception of the company to improve.
For today's recommendations, I scanned the new lows lists for Sept. 25, 26 and 27. I found three that I feel have excellent prospects for a three-year haul and decent-to-good prospects for the coming year.
American Eagle Outfitters
Based in Pittsburgh, American Eagle Outfitters Inc. (AEO) caters to older teenagers and young adults.
It operates about 900 retail stores under its flagship brand, and 150 or so under the Aerie brand. Aerie sells intimate apparel and personal care products for girls and young women.
During the past 10 years, American Eagle has increased sales and earnings at about a 10 percent annual clip. The past five years have brough a slowdown in those rates. However, I believe American Eagle has a strong brand, a reasonably loyal customer base and good marketing sense.
At 13 times earnings, I think this wounded eagle has the potential to fly high again.
Cloud Peak Energy
I am intrigued by the coal industry, because it has been pummeled for the past three years. New environment restrictions probably will assure that coal will never again generate half of the electricity in the United States, as it did in the past.
But coal has made a minor comeback, bouncing back up to 40 percent of electrical power generation from a figure in the high 30s. I think it will continue that comeback, and I believe that the United States is capable of exporting a good deal more coal than it now does.
This leads me to recommend Cloud Peak Energy Inc. (CLD) of Gillette, Wyo., whose coal generates about 4 percent of the nation's electricity. It mines coal in Wyoming and Montana, and its coal has a relatively low sulfur content.
While many coal mining companies stagger under an excessive debt load, Cloud Peak's debt load is less onerous than most. The stock's valuations are alluring to a cheapskate like me. It sells for less than seven times earnings, about 0.6 times revenue, and slightly less than book value (corporate net worth per share).
My final pick will make many people say I'm crazy. It is J.C. Penney Co. (JCP), the struggling retailer. Penney lost $1.35 a share in 2012 and is expected to post another loss this year, but a narrower one, perhaps about 65 cents a share.
Analysts expect Penney to be back in the black in 2014 to the tune of about $1.35 a share. That's far below what the company earned in its good years. In 2006 and 2007, for example, it earned more than $6 a share.
Many professional investors are furious at Penney at the moment, because it did what they consider a head fake, saying that things were improving, then turning around and raising money by selling new stock, diluting the value of existing shares.
Of 24 Wall Street analysts who follow Penney, just seven recommend it. I view it as a risky stock, with some potential to go bankrupt. But I think it will probably survive and gain some traction with new initiatives, such as “shops” within the department stores that feature a particular well-known brand.
The stock has fallen to about $9 from about $15 two months ago and more than $30 in most of 2011. It's a rank speculation at this point, but I think a reasonable one.
Those are my bottom-fishing recommendations for today. I'll have a performance update in March, and new selections then.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Penguins missing Martin, Ehrhoff, Adams; prized prospect Pouliot called up
- Pittsburgh police break up customer fights over Air Jordan 11 shoes
- Undersized Beachum quietly excels at 1 of game’s pivotal positions
- Hotel building boom sweeps Pittsburgh region
- Michigan State defensive coordinator a Pitt coaching candidate
- Steelers notebook: Polamalu, Taylor unlikely to play, Harrison ‘ready’
- Position move fits Pitt sophomore Artis
- Pirates sign Corey Hart to 1-year deal
- Penguins’ defensive depth proves valuable
- Pitt: Football coach hire comes 1st, athletic director 2nd
- As smokers seek Cuban cigars, retailers point to trade embargo