Everyone loves a bargain. These 5 companies are off more than 65% in the last year, and look cheap as chips.
When Marks & Spencer (LSE: MKS) has half price off their latest kitchenware range, you just want to go out and buy some new pots and pans, don’t you?
Or when Tesco (LSE: TSCO) is selling their Tesco Finest Guentota Estate Chardonnay Viognierhas at half price – just £3.99 – you just want to buy a bottle or two, don’t you?
Smart stock market investors also love a bargain. They love sniffing around the bargain basement bin looking for beaten up companies suddenly selling at a discount to their true value. It’s exactly this type of strategy that has seen Warren Buffett amass a personal fortune somewhere in the $50 billion range.
Alas, I’m still some way short of my first billion, or indeed my first million, but it doesn’t stop me looking for bargains. Here are 5 companies I spotted whose share price is down 65% or more over the past 12 months.
65% Off These Companies Today
| Company | Share Price Now | 12 Month High Share Price | % Off 12 Month High | Forward P/E |
|---|
| Laird (LSE: LRD) | 93p | 528p | 82% | 5 |
| CSR (LSE: CSR) | 180p | 530p | 66% | n/a |
| Bluebay Asset Management (LSE: BBAY) | 97p | 367p | 74% | 5 |
| Man Group (LSE: EMG) | 222p | 626p | 65% | 6 |
| Rightmove (LSE: RMV) | 173p | 540p | 68% | 8 |
Just because company’s share price is off 50%, it doesn’t necessarily mean it is cheap. It’s always worth remembering a company that has lost 99% of its value can still lose another 50%! And don’t forget what happened with Woolworths! Their shares weren’t cheap, they were bust!
2 Plays On A Recovering Mobile Phone Market
Let’s take a peek at each company.
Laird is engaged in the design and supply of critical products and systems for wireless and other electronic applications. The largest market for its products in 2008 was cellular handsets.
You don’t have to be a rocket scientist to work out they are struggling in this current economic environment, with revenue in the last quarter of 2008 expected to be off some 25% to 30% at constant currency. In years gone by, Laird has traded on a price to earnings ratio (P/E) of around 20, making the forward P/E of just 5 look ridiculously cheap.
CSR is in a similar industry. It designs and supplies Bluetooth technology to mobile phone manufacturers. It is going through a very tough time, with revenues and profits falling so much that it's expected to make a loss in 2009. But it has a strong competitive position, so when the mobile phone market recovers, so should CSR.
2 Cheap Asset Managers And 1 Dominant Property Company
Bluebay Asset Management is, not surprisingly, an asset management group. Given the stock market’s fall, its funds under management and its performance fees have been under pressure. But it does have a substantial cash balance, and is highly leveraged to any stock market recovery.
Man Group is a much larger version of Bluebay, and is in fact a FTSE 100 company. As an added bonus, its current forward dividend yield is around 13%, presuming it is able to hold it at current levels.
Many people will already be familiar with leading property website Rightmove. It has the dominant share of the UK online property advertising market, and benefited from the move to online from offline, and the great property boom of 2001 to 2007 (RIP).
Obviously its business faces some significant headwinds in the form of a collapsing housing market. The fact that banks aren’t lending doesn’t help either. Yet it's not losing market share and online continues to be a significantly more cost-effective medium for advertisers than offline. If the housing market does stabilise, it should be one of the main beneficiaries.
Leave The Research To Us
You could easily make a case that each of these shares are not cheap today, despite them being ‘on sale’ and despite most of them sporting cheap-looking P/E ratios. Economically, we are still struggling, both here in the UK and around the world, particularly the US. In such an economy, you could argue profit estimates for 2009 or 2010 are not worth the paper they are printed on.
I’m not suggesting any of these 5 companies are a screaming buy. But I am suggesting they are worthy of further research. Feel free to place your comments and thoughts in the box below this article.
Maynard Paton, our Chief Analyst over at Champion Shares, has already done some in-depth research on CSR, Bluebay Asset Management and Rightmove. You can sign up to a free 30-day trial today and get access to ALL his latest research and stock recommendations, including his in-depth thoughts on the 3 companies mentioned above. Click here for more information.
As ever, I wish you happy investing in this bargain filled market.
Stop Press: Maynard has just released all his updated buy/hold/sell Champion Shares recommendations, plus he has a look at Warren Buffett’s company Berkshire Hathaway (NYSE: BRK.A).
More: Don't You Make The Classic Investing Mistake | Maybe It Is Time To Buy
> Of the companies mentioned in this article, Bruce Jackson owns Berkshire Hathaway B shares.
