Potential Home Run Stocks For July 15
July 16, 2008 | By Peter CherewykMany successful individual investors have at some point in time had the enjoyable experience of picking a stock for their portfolio that turned out to be an absolute home run.
Buy Like Buffett
Even the success of legendary investor Warren Buffett and his holding company, Berkshire Hathaway (NYSE:BRK.A, BRK.B), has been primarily derived from a handful of outstanding stock picks. Buffett's decisions decades ago to buy a massive number of American Express (NYSE:AXP) shares in the wake of the salad oil scandal that had depressed the stock's price, and his long-term investments in outstanding companies such as Coca-Cola (NYSE:KO) have been the driving force that powered Berkshire Hathaway to market-beating returns for many years.
What is most interesting about those types of home run stock picks is that anyone could have easily made the same decisions and invested heavily into those stocks as well. All that was required to capitalize on those opportunities was a keen eye and a willingness to bank on companies that the rest of the market was selling off.
With that in mind, here are five established companies that have been sold off by the market recently to near 52-week lows, but are also expected to produce positive earnings per share (EPS) in the current fiscal year and trade with relatively cheap forward P/E ratios.
Company forward P/E Market Cap. (billion)
Autoliv
(NYSE:ALV) 7.96 $3.05
Toro
(NYSE:TTC) 8.36 $1.18
Westpac Banking
(NYSE:WBK) 8.71 $33.7
Suburban Propane
(NYSE:SPH) 9.11 $1.17
Toyota Motor
(NYSE:TM) 10.3 $138
Data as of market close July 15
The Windup
Autoliv is a producer and supplier of automotive safety products, headquartered in Stockholm Sweden. The company deals in a wide array of restraint devices such as seat belts, child seats, and airbags but also develops safety electronics and night vision systems.
Autoliv currently has dividend yield of about 3.8% thanks to an increase in Q3 dividends from 39 cents to 41 cents, which was initiated with shareholders of record on August 7, 2008. A 40% payout ratio demonstrates the company's ability to distribute these profits into the future.
And The Pitch
Autoliv has beat analysts consensus estimates in the last four quarters but keep in mind it repurchased about 7 million shares during that time (about 10% of outstanding). The current quarter EPS estimate sits around $1.25. (To learn how share repurchases can throw your evaluations a curve ball, read How Buybacks Warp The Price-To-Book Ratio.)
Revenue increased 7.6% in Q1 to $1.9 billion and net income went up 11.3% to $81.5 million. Since May 1, Autoliv has dropped to $42.73 from $51.27 which makes it a low pitch to swing at. Autoliv announced it will release second-quarter results on July 22, 2008.
What do you think of Autoliv's prospects going forward? Join me (PeterAB) in the FREE Stock Picking Community to share your thoughts and see what other investors are saying.
By Peter Cherewyk
At the time of writing Peter Cherewyk did not own shares in any of the companies mentioned in this article. |
