5 top-rated stocks at half price
This post comes from The Motley Fool’s Rich Duprey.
You love buying your shirts when they go on sale. And who can resist a buy-one-get-one-free offer? So when our stocks go on sale, why do we bemoan their low prices?
Smart investors like Warren Buffett and Marty Whitman love it when their stocks are suddenly selling at bargain-basement prices. For them, these companies become no-brainer buys.
Members of the MSN CAPS community also like a bargain, apparently. Below, you’ll find five companies whose shares are selling at least 50% below their 52-week highs, but that still earn high marks from our investor-intelligence database. Consider it a buy-one-get-one-free sale on stocks.
Here are our stocks:
Akorn (AKRX) is off about 59% since hitting its 52-week high of $3.64 on Nov. 4, 2008. The Lake Forest, Ill., company produces therapeutic and diagnostic drugs used in ophthalmology, anesthesia and other areas. At CAPS, Akorn has a three-star rating.
American Capital (ACAS) is down 81% since hitting its 52-week high of $16.35 on Nov. 4. The Bethesda, Md., company provides debt financing for buyouts led by private-equity firms. At CAPS, American Capital has a four-star rating.
Eagle Bulk Shipping (EGLE) is down 57% from its 52-week high of $11.95, established on Nov. 10. The New York company is engaged in ocean transport of iron ore, coal, grain, cement, fertilizer and other dry goods. At CAPS, Eagle Bulk Shipping has a four-star rating.
Lloyds Banking Group (LYG) is off 59% from its 52-week high of $13.54 on Nov. 4. The London banking and financial services company has a four-star rating on CAPS.
Spectrum Pharmaceuticals (SPPI) is down 59% from its 52-week high of $10.00, established on Sept. 4. The Irvine, Calif., biopharmaceuticals company focuses on anti-cancer therapies. Spectrum has a four-star rating at CAPS.
Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. The same thing applies here: Make sure there’s nothing seriously wrong with the company before you plug it into your portfolio.
A biotech’s bumpy ride
Shares of Spectrum Pharmaceuticals were on a tear before the Food and Drug Administration announced its OK of the drug Zevalin as a treatment for non-Hodgkins lymphoma on Sept. 4. CAPS All-Star “zzlangerhans” had anticipated that shares would drop on the news, though, and drop they did.
The stock resumed its march north as the company awaited approval of its supplemental new-drug application for Fusilev to treat advanced metastatic colorectal cancer. Investors were disappointed to learn that the FDA found Fusilev to be less effective than the chemotherapy treatment leucovorin; regulators on Oct. 9 recommended a meeting with company officials to discuss options for continuing to seek approval of the drug. Fusilev is already approved by the FDA for several other uses, including the bone tumor osteosarcoma.
The latest development confirmed the suspicions of top CAPS member “aracer,” who attributed a big bump in Fusilev sales earlier this year to a temporary shortage of generic leucovorin.
Spectrum Pharmaceuticals does have a number of irons in the fire, making it more than a one-hit wonder. Its strengths kindled speculation last month that Spectrum would make a good takeover candidate for Bayer (BAYRY) or Bristol-Myers Squibb (BMY). The company was able to use renewed interest in its prospects to raise $50 million in an offering of shares and warrants in September priced at $7.55. Good timing.
Spectrum still carries a high four-star rating on CAPS, and 96% of the members rating think the stock will outperform the broader market. It’s been one of the worst-performing drug makers over the past month, though, as investors fled following the FDA’s response on Fusilev.
While “Bhavtrader” had been expecting the approval of Fusilev as a colon cancer treatment, the CAPS participant thinks Spectrum has other attributes that make it attractive to investors, including an absence of long-term debt on its balance sheet.
Big debt, sizable potential
Another stock reflecting the hopes and fears of investors is American Capital, a business-development company that has experienced its share of setbacks since the meltdown in the financial markets. With the company facing high debt, a recent history of losses and a still-teetering industry, there’s little wonder that investors are able to list a few motives for dumping the stock.
Yet there are at least two sides to every story, and American Capital also offers a pretty strong bull case. For one thing, despite industry woes, it can still generate strong cash flows while holding an investment portfolio that enables it to capitalize on strategic exits from positions.
CAPS member “MizzouFanVan” said that American Capital’s share price makes for a fantastic opportunity: “This stock is incredibly beaten down. Price to Book value is .37, which is crazy right now. And it continues to bring in Free Cash Flow. This is another company that survived the recession and will bounce back nicely.”
It pays to start your own research on these stocks at MSN CAPS. Read a company’s financial reports, scrutinize key data and charts and examine the comments your fellow investors have made — all from a stock’s CAPS page. Sign up today for the completely free service and tell us whether these stocks are twice as good at half the price.
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