August 12, 2011 PSW Staff |
computer programs, it's a great time to look at fundamentally sound issues that have taken a significant haircut. These are stocks that have been on the right track, and in some cases, may have previously been a little expensive. Nothing has changed fundamentally with these issues over the last couple of weeks, or with the overall economic recovery despite the fact that stock prices have fallen off a cliff lately. For the astute investor who knows that despite what the media tells him or her, selling all of their stocks when they are down for no reason and buying gold when it is at an all time high for no reason is a good way to double your losses for no reason. We have zeroed in on five stocks that have recently been hammered even more than the major markets have as a whole, mainly because of their lower price and smaller capitalization stature. Some have been on a long and steady climb, some are well into a turnaround story, and some are just plain solid. These are the kind of stocks that may have been on your watch-list, but may have had valuations that were a bit to high for your liking. When the media helps take down stocks for no reason, and then immediately starts to get bored with the markets again, that should be your clue to pounce. WEN (Wendy’s) Wendy's just reported a very solid quarter, and is looking to make a run at being the number 2 burger chain ahead of Burger King. The company also announced that it has finalized its sale of Arby's, where much of its problems had been. Wendy's matched expectations on earnings, and beat on sales and growth. Same-store sales were up 2.3% compared to the 1.3% that was expected. The company managed to match on earnings despite a pretty big margin decline on increased costs for commodities and some new advertising campaigns. This sets up Wendy's quite well for the next few quarters, and with a stock price that was recently hammered along with the rest of the market, may set up a great long trade. WTSLA (Wet Seal, Inc.) As a whole, retail sales for clothing stores in July were up big time, and out of the top ten clothing retailers, Wet Seal's sales were up the most at 7.4%, just barely beating Hot Topic's. The company will release their fiscal second quarter results on August 18, but has recently said that it expects to record earnings of 2-3 cents per shares as opposed to the 2 cents expected by the street. As good as July sales were, back to school shopping had only just began, and Wet Seal is positioning itself as a high fashion, low cost retailer. They have also taken steps with cost structure to curtail higher cotton cost's in the future should the commodity continue to get pricier. The company has zero debt, and over $1.80 per share in cash. The stock has lost more than 10% of its value since the markets went haywire. ZQK (Quicksilver, Inc.) Quicksilver is in the same business as Wet Seal, the difference is that they make clothing, while Wet Seal sells it. Quicksilver designs, produces and distributes clothing and other accessories under a host of different brand names, inducing a sportswear line for young women called Roxy, and extreme sports line for young men called DC. The stock had been in a tight trading range between $4 and $5 all year after a $3 to $4 dollar range last year. When the market tanked late last week, the stock dipped below the $4 range despite threatening to break into the $5 to $6 range earlier in the week. Quicksilver has also gotten a boost from the excellent retail sales numbers of the past two months. Valuations for this stock have been a concern, and they do have significant debt on the balance sheet. The fall from above $5 to around $4 has helped these valuations significantly, and the stock is now trading very close to book value, and has a forward P/E that is approaching the single digit range. RTIX (RTI Biologics, Inc.) RTIX is in the Medical Appliances & Equipment Industry, so it is kind of a mix between a technology stock and a healthcare stock. It has held up quite well, actually, over the last couple of weeks, and saw a big gain today, allowing it to stay relatively close to its 52 week high. The company beat analyst's estimates by a penny in the most recent quarter, has seen 35% earnings growth per year for the last five years and is expected to see 27% earnings growth for the next five years. Investors have been jumping in this stock every time if falls a little bit, and it has been steadily climbing for over a year now. Traders jumped in quickly during the most recent slide, and the stock would likely be much higher now if it were not for the sour mood on Wall Street. The stock is trading right at sales, book and growth, has only $1 million in debt and almost $40 million in cash, or almost a quarter of its market cap. BUSE (First Busey Corp.) Banks may be one of the only sectors fundamentally affected by the recent S&P fiasco, but First Busey's size and recent strength may help leave it unaffected. The company is worth less than a half billion dollars, has $200 million in debt and over $350 million in cash. The stock climbed from just over $4 to well above $5 over the past year but irrational selling this week sent the stock back down to the lower end of that range, and it is now trading just below book value. The stock also pays a nice and fairly consistent dividend with the current yield at 3.6%. |
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