“Buy low, sell high.” That’s a phrase that can probably be traced back to neanderthals swapping mastadon futures. No matter what you see in a stock, the benefits are multiplied when you can get in at the lowest possible price. It’s the same reason why people are willing to line up around the block to stampede into the doors of department stores at midnight: everybody loves a sale. So, in celebration of Black Friday and a good, old-fashioned, American love for getting when the getting’s good, we present five stocks that are trading cheap but may have the potential to bounce back.
Each of these stocks is down at least 20 percent year-to-date, has a share price of under $10, but also carries a PEG of under 1 and an average analyst recommendation of “buy” or better:
XEROX (XRX)
Xerox is the world’s biggest business equipment company, offering everything from copiers and printers to IT support services. Shares in Xerox have been taking a beating so far in 2011, dropping over 30 percent since January 1st. Trading at under $8 per share, Xerox has a market cap of nearly $11 billion and a PEG ratio of 0.65.
Alcoa (AA)
Aluminum manufacturer Alcoa has a market cap of over $10 billion and is often held up as a strong bellwether for the economy as a whole. Well, this year’s it’s down over a quarter. However this comes despite Alcoa having a PEG of just 0.25 and an average rating of buy or better from analysts.
Bottoming Out
Getting a great bargain isn’t just about getting something while it’s cheap, it’s about getting it while it’s at its cheapest. As such, it might also be worth considering where a stock’s price is at in relation to its 52-week low.
MetroPCS Communications (PCS)
Shares in wireless company MetroPCS got hammered on August 1st when the company registered an earnings miss that dropped the stock 30 percent in a day. The shares still haven’t recovered, continuing a decline that has shares trading at close to $8 apiece. The stock is only trading 6 percent above its 52-week low, meaning that it’s as cheap now as it has been all year. Add to this a PEG of only 0.54 and it’s possible that PCS could be a stock to consider if one were hunting for bargains.
First Niagara Financial Group Inc. (FNFG)
Bankers First Niagara have had a brutal year, losing almost 40 percent of their share value in a decline that began this summer. The stock has continued to fall and is currently trading at a little over $8.50 per share, just 6 percent over its 52-week low. With a PEG of only 0.54, some investors might find First Niagara attractive.
Put it All Together and…
One final company to consider would be Spansion Inc. (CODE). The Sunnyvale, CA company is a designer, developer, and manufacturer of flash memory semiconductors. Spansion has had a rough year, losing over 46 percent of its share price since the New Year and taking a particularly sharp tumble in late October after posting a Q4 loss and announcing a cost-cutting plan that would include closing its Kuala Lumpur plant. However, a closer look at Spansion reveals a microscopic PEG of 0.18, shares trading just over 1 percent above its 52-week low, and a share price of just over $9.25. All told, Spansion could be one of the best of the Black Friday Bargain Buys.
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