3 stocks trading at 52-week lows I’d buy today

Rupert Hargreaves looks at three companies he believes have been wrongly oversold by investors.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The recent market volatility has thrown up some fantastic bargains for investors. So, without further ado, here are three companies trading at 52-week lows that I’m considering buying today.

Missed expectations

Year-to-date, shares in medical products company Convatec (LSE: CTEC) have lost 21%. Investors have rushed for the exit following a series of worrying developments including a profit warning and immediate departure of its CEO a few weeks ago.

However, over the longer term, I believe this business should be able to rebuild its reputation because the demand for wound care products is only going to expand. Analysts are predicting sector growth of around 4% per annum.

These tailwinds should give Convatec room to stabilise itself in the years ahead. City analysts are expecting earnings per share (EPS) to come in at $0.16 for 2018, putting the shares on a forward PE of 12.9. In my view, this isn’t too demanding, especially for a defensive healthcare company.

Looking past Convatec’s short-term, self-inflicted issues, I think now could be a good time to snap up shares in the troubled medical group.

Growing market

I’m optimistic about the outlook for security group G4S (LSE: GFS) for similar reasons. The company’s problems are mainly self-inflicted, and the broader global security market is expected to grow at a high single-digit annual rate for the foreseeable future. 

As one of the largest private security firms in Europe, with a foothold in the United States and other regions around the world, G4S is well-placed to benefit from this growth.

Recently, shares in the firm have come under pressure after the UK government was forced to take control of Birmingham prison, which it has been running since 2011 on a 15-year contract. This is just a small part of the group’s global operation, but it seems investors are worried about the impact the development will have on the company’s reputation.

While it’s not ideal, I still think the shares are attractive, primarily because they are changing hands at a highly-discounted 10.6 times forward earnings, and support a dividend yield of 5%. After G4S sorts out its problems, I reckon the shares could re-rate to a higher multiple.

Brexit jitters

My last 52-week low pick is recruiter Hays (LSE: HAS). After adding around 15% during the first eight months of 2018, shares in Hays are now trading down 20% on the year after issuing a weak trading update at the beginning of October.

I think this could be an excellent opportunity for value-seeking investors. The sell-off has taken the shares down to a valuation of just 12.5 times forward earnings. Previously, the stock was trading at a forward P/E of nearly 20, which tells me that recent decline seems to be based on Hays’ premium valuation more than anything else. Indeed, City analysts are still expecting EPS growth of 11% for fiscal 2019. Further growth could be on the cards in the years after as well, as the global economy continues to expand. 

Added to the attractive valuation, there’s a 4.5% dividend yield on offer, backed up by £80m of net cash on the balance sheet.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Is Rolls-Royce’s share price an irresistible bargain?

Is Rolls-Royce's share price the FTSE 100's greatest bargain today? Royston Wild explains why he would -- and wouldn't --…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the Vodafone share price a wonderful bargain or a horrible value trap?

As the Vodafone share price continues to fall, is it now a stock to buy with a view to a…

Read more »

Hand of a mature man opening a safety deposit box.
Investing Articles

I’d buy 95,239 shares of this banking stock to generate £200 of monthly passive income

Muhammad Cheema takes a look at how Lloyds shares, with a dividend yield of 5.9%, can generate a healthy monthly…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Can FY results give the Antofagasta share price a long-term boost?

The Antofagasta share price has had a good five years. Now the company says it's set to enter a new…

Read more »

Person holding magnifying glass over important document, reading the small print
Dividend Shares

Can I make sustainable passive income from share buybacks?

Jon Smith notes the rise in share buybacks from FTSE 100 companies, but flags up why they aren't great for…

Read more »

Front view of a mixed-race couple walking past a shop window and looking in.
Investing Articles

After the Currys share price rockets, here are more potential UK takeover targets!

The Currys share price has surged 39% higher in response to news of a takeover bid. Which UK stocks could…

Read more »

Investing Articles

Down 25%, where will the British American Tobacco share price go next?

The British American Tobacco share price has taken a hit. But this Fool isn't deterred. He think's now could be…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

2 cheap dividend stocks I’d snap up in a heartbeat!

This Fool is on the look out for quality dividend stocks and earmarks these two firms as great options to…

Read more »