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Here Are 2 Stocks Trading Near 52-Week Lows That Are Worth More Dead Than Alive

Photo credit: Rafael Matsunaga. Licence: http://creativecommons.org/licenses/by/2.0/

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 two stocks I’ve chosen at random from a list of those that popped up. They are: Singapore Airlines Ltd (SGX: C6L) and Hour Glass Ltd (SGX: AGS).

Singapore Airlines and Hour Glass 52 week low table
Source: SGX Stock Facts; Yahoo Finance

You may have noticed that both stocks also have 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. In theory, 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 (again, in theory).

Singapore Airlines is the company that owns Singapore Airlines, the national airline of Singapore. Beyond that, the company also has other airlines under its belt, including Silk Air and Scoot.

The company has a listed subsidiary in SIA Engineering Company Ltd (SGX: S59) as well. SIA Engineering specialises in providing aircraft maintenance, repair, and overhaul (MRO) services. It has over 80 international airlines as customers.

Singapore Airlines has been a consistent long-term underperformer in the stock market. Over the past five and 10 years, its stock price is down by 9% and 45% respectively, according to Google Finance.

In the quarter ended 30 September 2016, Singapore Airlines experienced a 0.5% decline in revenue to S$3.65 billion. Its profit meanwhile, had plunged by 66% to S$74.2 million. In its earnings release, Singapore Airlines commented that the “passenger airline business continues to be impacted by geopolitical uncertainty and weak global economic conditions.” Moreover, there’s the presence of “excess capacity and aggressive pricing” in the company’s market.

Next up is Hour Glass, a luxury watch retailer with over 40 boutiques in nine key cities in the Asia Pacific region. Some of the high-end watch brands that can be found in Hour Glass’s stores include Audemars Piguet, Hublot, Jaeger-LeCoultre, Panerai, Rolex, and Patek Philippe.

From its fiscal year ended 31 March 2006 (FY2006) to FY2015, Hour Glass had managed to compound its revenue and net profit at annual rates of 8.4% and 18.7%, respectively. But, the company has been facing challenges in its business in recent times.

For example, in the six months ended 30 September 2016, Hour Glass saw its revenue decline by 7% year-on-year to S$311.3 million. Together with a big drop in earnings from associates, Hour Glass’s profit had declined by 18% to S$16.5 million.

Hour Glass commented in its earnings release that the “slowdown in the global economy continues to impact consumer sentiment and discretionary spending.”

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 Singapore Airlines and Hour Glass 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.