FTSE stocks that are at 52-week lows can sometimes present a unique buying opportunity. There’s the potential for the company to become a value stock, in that the share price has fallen below the long-term fair value. Here are two examples that I’ve spotted right now, that could provide me with long-term gains.
Needing a fix
The first company is Halfords (LSE:HFD). At 165p, the stock is down 6% over the past year. This isn’t a disaster of a performance, but is still at the lowest price over the 52 weeks.
The UK retailer of motor and cycle products posted some strong interim full-year results back in November. Revenue was up 13.9% versus the previous year, with group profit before tax also jumping 15.8% to £21.3m.
I think the slump in the share price recently comes following weaker than expected December trading. This was blamed on the weather, along with customers generally spending less. I think both factors are just blips. In fact, given the amount of the products sold by Halfords for car or bike maintenance, I’d expect demand to be fairly constant going forward.
A risk is that given most products are imported, the company is exposed to the exchange rate between the British pound and US dollar.
I’m considering using this dip to pick up some Halfords shares, as the broader full-year results show good momentum to me.
An off-the-wall idea
Another firm in the mix is Funding Circle (LSE:FCH). With a market cap of £114m, the business is close to being a penny stock. The share price has fallen by a whopping 40% over the past year and is at 52-week lows.
This is definitely a high-risk idea for consideration. One of the reasons for the drop in value is the increase in interest rates. This is because the business focuses on raising funding through loans for small and medium-sized firms. Given that the cost of taking out a loan has increased due to the interest rate shooting higher, it’s no surprise to see demand for this has fallen.
The half-year results highlighted this, with group total income, origination revenue, loans under management, and profit before tax all lower than a year ago.
Yet I believe this could be a great value play on the assumption that interest rates in the UK won’t go any higher from here. If this is correct (and if we see some interest rate cuts), then Funding Circle may have already hit rock bottom.
If we see rate cuts coupled with strong economic growth over the coming year and beyond, demand for loans could increase significantly. I note that this is a risky play but the reward (given the extent of the share price fall) could be large. I’m considering allocating a small amount of money to the stock.
