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 their respective 52-week lows 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.
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As such, I will screen for stocks that are trading near 52-week lows 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 such stocks: StarHub Ltd (SGX: CC3) and Jardine Strategic Holdings Limited (SGX: J37).
Source: SGX Stock Facts
StarHub is an easily recognisable company in Singapore given that it’s the second largest operational telco in our Garden City.
In mid-February, StarHub reported its 2017 full year results. Although its revenue was flat at S$2.40 billion, net profit was down by 27% to S$249.6 million. The weaker financial performance resulted in a decline in the telco’s dividend for the year too; it fell from S$0.20 per share in 2016 to S$0.16 per share.
Regarding its outlook, StarHub said that it expects its service revenue to be 1% to 3% lower in 2018. The telco also intends to pay a quarterly dividend of S$0.04 per share, which works out to an annual dividend of S$0.16 per share. Another thing to note about StarHub’s future is the potential for heightened competition. In late 2016, the Australia-based TPG Telecom was awarded Singapore’s fourth telco license. TPG Telecom announced last month that it expects to launch its service here in the second half of this year.
Next up, there’s Jardine Strategic, a sprawling conglomerate with interests in many Singapore-listed companies such as automobile distributor Jardine Cycle & Carriage Ltd (SGX: C07), bricks-and-mortar retailer Dairy Farm International Holdings Ltd (SGX: D01), property investor and developer Hongkong Land Limited (SGX: H78), and more.
Jardine Strategic has not been a favourite among investors recently. In the last six months, its stock price had declined by 10% while the overall market had gained 5%. What’s interesting here is that Jardine Strategic’s stock price performance looks different from its business performance.
In 2017, Jardine Strategic experienced a 7% increase in revenue to US$31.56 billion. Meanwhile, underlying profit attributable to shareholders stepped up by 11% to US$1.60 billion. The conglomerate’s dividend of US$0.32 per share for 2017 was also 7% higher than in 2016.
The market may not be fond of Jardine Strategic, but contrarian investors may want to use this opportunity to take a closer look at the company.
Jardine Strategic’s management appears confident about the company’s future. In the earnings update, the company’s chairman, Henry Keswick, shared the following comments:
“The Group’s key markets in Greater China and Southeast Asia look well placed for 2018 as the good levels of economic growth seen in 2017 appear set to continue. This, when coupled with the development initiatives that are being pursued across the Group’s businesses, provides the basis for future profit growth.”
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 StarHub and Jardine Strategic 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. The Motley Fool Singapore has recommendations for Hongkong Land and Dairy Farm International.