I’m a value investor. So, I like to search for companies that are trading at good value. A list of stocks that are near a 52-week low is a good place to start my search for a good reason.
These are the stocks that are either neglected or beaten down by investors. And, some of these stocks can be bargains in relation to their actual economic worth because market participants can at times react too negatively to certain companies that have sound long-term prospects but have experienced some short-term stumbles.
As such, I will screen for stocks that are trading near a 52-week low nearly once every week. There are many stocks that pop up on my screen each time I run it. In here, let’s look at three stocks I’ve chosen at random from a list of those that popped up. They are: Hong Leong Finance Ltd (SGX: S41), ComfortDelGro Corporation Ltd (SGX: C52), and Cordlife Group Ltd (SGX: P8A).
Source: Yahoo Finance; SGX Stock Facts
First up is financial services provider Hong Leong Finance. The company’s services include corporate finance and advisory, personal deposits and savings, corporate and consumer loans, and government assistance programmes for SMEs (small and medium enterprises).
Hong Leong Finance is actually the largest finance company in Singapore with its network of 28 branches and 10 SME centres across the island.
In the third quarter of 2016, the company saw its book value per share inch up by 1.3% to S$3.79 when compared to the same quarter a year ago. Hong Leong Finance commented in its earnings release that it “continue[s] to be affected by low productivity, elevated manpower costs and the after effects of cooling measures in the property markets.”
The next company on the list is ComfortDelGro. It is a land transport services provider with operations mainly in Singapore, Australia, the United Kingdom/Ireland, and China. It has a total fleet size of around 46,500 buses, taxis, and rental vehicles.
ComfortDelGro’s latest results (for the quarter ended 30 September 2016) was released in early November 2016. During the reporting quarter, the company suffered a 3.1% year-on-year decline in revenue to S$1.015 billion. But, tighter cost controls resulted in its profit attributable to shareholders increasing by 2.5% to S$87.3 million.
In its earnings release, ComfortDelGro commented that it expects to see growth from its rail operations for the whole of 2016. Elsewhere, the company also expects its revenue for its UK bus business to be lower due to the weaker pound sterling. The company expects its automotive engineering services business revenue to be down as well due to lower volume of diesel sold.
ComfortDelGro has been facing increasing competitive pressure from ride-hailing apps such as Uber and Grab. How is ComfortDelGro responding to threats from digital technologies? My colleague Chin Hui Leong has previously shared the company’s management’s thoughts on the matter. You can check them out here.
The last company on the list is Cordlife, a provider of cord blood banking services.
During the third quarter of 2016, Cordlife’s business suffered. Despite seeing its revenue tick up by 0.8% year-on-year to S$14.7 million, the company made a loss of S$559,000, which is a big reversal from the profit of S$7.6 million seen a year ago.
Cordlife’s share price has fallen steadily over the last 12 months and currently sits 35% lower than where it was back in 6 January 2016. Beyond its poor results, another factor that could have contributed to its lower share price is management turmoil. Back in March 2016, its chief executive had abruptly resigned in what appears to be acrimonious circumstances.
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.
Nothing we’ve seen here about Hong Leong Finance, ComfortDelGro, and Cordlife should be taken as the final word on their investing merits. The information presented in this piece should be viewed only as a useful starting point for further research.
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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.