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…
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: UOB-Kay Hian Holdings Limited (SGX: U10) and ComfortDelGro Corporation Ltd (SGX: C52).
Source: SGX StockFacts; Yahoo Finance
UOB-Kay Hian is a financial services company that provides stockbroking, futures broking, investment trading, margin financing, investment holding, nominee, and research services. It is headquartered in Singapore and has offices in Hong Kong, Thailand, Malaysia, and Shanghai in Asia. Outside of Asia, the firm has offices in London and New York.
In its latest quarterly results (for the three months ended 30 September 2016), UOB-Kay Hian reported a 9.9% decline in revenue to S$78.6 million. This drove a 25% fall in profit to S$15.2 million. The brokerage firm has been experiencing year-on-year declines in revenue and profit over its past few quarters.
Unfortunately, the company does not expect the trend to end soon. In its latest earnings release, UOB Kay-Hian commented that it “expect[s] investors to maintain a more risk adverse approach given the many prevailing uncertainties, including volatile currency fluctuations.” This will lead to low trading volumes, according to the company.
UOB-Kay Hian’s weak prospects has likely driven its PB ratio to a level that’s near a three-year low.
The next company on the list is land transport giant ComfortDelGro. Its operations are mainly in Singapore, Australia, the United Kingdom/Ireland, and China. Right now, ComfortDelGro has a total fleet size of around 46,500 buses, taxis, and rental vehicles.
The company’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. Meanwhile, Singapore’s second largest taxi company, Trans-Cab, had recently slashed its taxi rental rates by as much as 34%.
Moreover, ComfortDelGro’s fuel costs are likely to increase over the next few quarters given that oil prices have almost doubled from a level of less than US$30 per barrel that was reached in early 2016.
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 UOB-Kay Hian and ComfortDelGro 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.