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These 2 Companies Are Trading Near 52-Week Lows And Are Worth More Dead Than Alive

Some of the greatest investors around – John Neff and Walter Schloss are good examples – source their investing ideas from lists of stocks that have fallen hard.

That’s because they believe some beaten-down stocks will be bargains in relation to their actual economic worth. Market participants can at times react too negatively to certain companies that have sound long-term prospects but have experienced some short-term stumbles.

Nearly once every week, I run a screen to look for companies with stock prices that are near 52-week lows. This time, I decided to refine my screen by adding a new criteria: A price-to-book (PB) ratio of less than 1.

A company with a PB ratio of less than 1 is trading below its book value. Theoretically, investors can end up with a profit if they liquidate all the company’s assets and settle all its liabilities; in other words, a company with a PB ratio of less than 1 is worth more dead than alive, in theory.

There were many companies that popped up on my screen this time. Here are two I picked at random: Stamford Land Corporation Ltd (SGX: H07) and Perennial Real Estate Holdings Limited (SGX: 40S).

stamford-land-perennial-52-week-low-table
Source: S&P Global Market Intelligence

Stamford Land has wide interests in the real estate business as seen from its business segments: Hotel owning and management; Property development; Property investment; Trading; and Others.

The company operates only in Australia, New Zealand and Singapore. The largest geographical revenue contributor is actually Australia, followed by New Zealand, then Singapore.

Stamford Land’s Hotel owning and management segment, as the name suggests, is engaged in the ownership and management of hotels. Some of the hotels under the company’s banner include Sir Stamford Circular Quay and Stamford Plaza Sydney Airport. This segment made up the majority of Stamford Land’s revenue and profit in the fiscal year ended 31 March 2016.

The next company on the list is Perennial. It is predominantly a real estate owner, developer, and manager. Beyond that, it also has a relatively small healthcare-related business.

Though listed in Singapore, the majority of Perennial’s income is derived from China. One of the company’s recent deals is the acquisition of a 49.9% stake in Renshoutang, the largest integrated eldercare services operator in Shanghai, China.

A Foolish conclusion

It’s worth noting that not every company with a stock price near a 52-week low is a legitimate bargain. A declining stock price can decline yet further if the underlying business performance continues to weaken.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.