Trying to seek out the market’s most undervalued and undiscovered value stocks can be tricky. However, the 52-week low ‘bargain bin’ never fails to throw up some interesting ideas.
So, here are just five value picks trading at or near their 52-week lows.
Declining demand
Investors have turned their backs on engineering group Weir (LSE: WEIR) due to the company’s exposure to the oil & gas industry.
City analysts have slashed their earnings estimates for the company and now expect the group to report earnings per share of 95p for 2015. A year ago analysts were expecting Weir to report EPS of 157p for full-year 2015.
Weir is preparing for the worst. Management is cutting costs and trying to streamline the group’s production process. Luckily, Weir is diversified, and while orders from the oil & gas industry are slowing, orders from the power, industrial and mining sectors continue to expand.
Weir currently trades at a forward P/E of 15.5 and supports a dividend yield of 2.9%. Any uptick in orders from the oil & gas sector should send the company’s shares skywards. Moreover, there has also been the talk of a private equity bid for the firm.
Troubled miner
Lonmin (LSE: LMI) has been struggling with high production costs and low platinum costs for some time. The company isn’t expected to report a profit until 2016. However, the real value is to be found in Lonmin’s balance sheet.
At 78p per share, Lonmin trades at only 30% of its tangible net asset value. According to the company’s last set of reports, Lonmin’s tangible net asset value stands at 280p, indicating that the company’s shares could double or even triple from present levels before they fully reflected the value of its assets.
Attractive risk/reward
Tungsten’s (LSE: TUNG) shares have slumped by 80% year to date and after these declines the company’s risk/reward profile looks attractive.
Concerns about Tungsten’s rate of growth, along with the state of the company’s balance sheet fuelled the sell-off during the past six months. But now expectations have been lowered, the state of the balance sheet has been improved through a placing and Tungsten is looking to grow again.
Tungsten’s management believes that the company can process up to $1trn of invoices per year and provide financing for $100bn over the long term. Tungsten may have got off to a rocky start, but the company has plenty of potential.
Commodity troubles
The falling prices of key commodities iron ore and oil have sent Rio Tinto (LSE: RIO) and Genel Energy (LSE: GENL) crashing into the 52-week low ‘bargain bin’.
However, these two companies are well placed to ride the recovery in commodity prices when it comes.
Genel has a cash-rich balance sheet, with a cash balance of $489m at year-end 2014. The company’s production expected to hit between 90,000 and 100,000 barrels of oil per day this year. Analysts currently estimate that Genel will report a pre-tax profit of $55m this year, before jumping 79% during 2016. Of course, if the price of oil returns to $100 per barrel, these forecasts will be rapidly revised upwards.
Meanwhile, Rio’s low production costs of around $30 per ton of iron ore mean that the company will be able to weather out the storm of falling prices. Additionally, investors will be paid to wait for the company’s recovery. Rio currently yields 5.7%, and the payout is easily covered by earnings per share.
