Last month, the market saw a major sell-off as US market participants reacted to the International Monetary Fund cutting its forecast on global growth. The broad-based S&P 500 index plummeted more than 3% in a single trading session on Wednesday, 10 October. Closer to home, Asian market followed suit the very next day with the Straits Times Index (SGX: ^STI) down more than 2%.
However, instead of seeing this as bad for market participants, long-term investors who are on the lookout for bargains can make use of the pessimistic market sentiment to pick up stocks on the cheap. Here are two stocks trading well below their respective 52-week highs that could make great investments for the long run.
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AEM Holdings Ltd (SGX: AWX) is perhaps one of the most volatile stocks on the market. The company that builds test handlers for the production of semi-conductors saw its stock price rise more than seven-fold in 2017 on the back of a 576% spike in profit. However, recent fears of its major client completing its upgrading cycle of its test handler system (which is from AEM) has caused a deep sell-down of the stock. Its stock now trades at nearly 57% off its peak.
However, there could be happier times ahead. The company recently announced that it was chosen by Huawei to deliver a test solution to test 100Gbps links for Huawei’s short reach 5G backhaul network next year. This is testament to the company’s superior test handler systems and strive for technological enhancement to keep it relevant.
Despite the upgrading cycle of its test handler systems of its major client being almost complete, AEM continues to sell field services and consumables, which are the sustainable and recurring elements of its business. Around 56% of its revenue came from its recurring business in 2017.
Right now, AEM shares trade at S$0.94 each, which translate to a reasonable price-to-earnings multiple of 6.6 and a dividend yield of 4.7%.
APAC Realty Ltd (SGX: CLN) has had a tumultuous start to life as a listed company. It was listed around one year ago and has already seen its stock price plunge nearly 58% from its peak.
The real estate brokerage company, better known by its agency – ERA, has been impacted by a new round of property cooling measures in Singapore, which will likely impact near-term transaction volume. However, there are still reasons to be optimistic over the longer time frame.
In September, APAC Realty completed the purchase of a commercial property for S$72.8 million, which will serve as a permanent place of business and help provide better training services to agents. It is also a step the company is taking to expand its real estate business in Singapore and regionally. It is hoping to use the new building to hold regional meeting and provide training for agents across the region.
Second, the property cooling measures that have been put in place are only designed to ensure that property prices rise sensibly and in line with wage growth. Over the long-term, it is very likely that property prices and demand will continue to grow.
At the time of writing, APAC Realty shares trade at S$0.50 per piece, which give a low price-to-earnings ratio of 6.3 and a tasty dividend yield of 6.1%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on AEM Holdings Ltd. Motley Fool Singapore contributor Jeremy Chia owns shares in AEM Holdings Ltd.