New Year’s Eve is a great time to celebrate a nice recovery year for banks stocks, and to look ahead by identifying names that are trading at low multiples to forward earnings estimates.
If you were picking stocks a year ago, after the KBW Bank Index sank 25 percent, withBank of America dropping 58 percent during 2011 and Citigroup falling by 44 percent, there was a host of large-bank plays trading at significant discounts to book value. Bank of America’s stock was trading for just 0.4 times tangible book value at the end of 2011, while Citigroup traded for 0.5 times tangible book value.
Best Cheap Stocks For 2013: International Business Machines Corporation(IBM)
International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. Its Global Technology Services segment provides IT infrastructure and business process services, including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology-based support services. The company?s Global Business Services segment offers consulting and systems integration, and application management services. Its Software segment offers middleware and operating systems software, such as WebSphere software to integrate and manage business processes; information management software for database and enterprise content management, information integration, data warehousing, business analytics and intelligence, performance management, and predictive analytics; Tivoli software for identity management, data security, storage management, and datacenter automation; Lotus software for collaboration, messaging, and so cial networking; rational software to support software development for IT and embedded systems; business intelligence software, which provides querying and forecasting tools; SPSS predictive analytics software to predict outcomes and act on that insight; and operating systems software. Its Systems and Technology segment provides computing and storage solutions, including servers, disk and tape storage systems and software, point-of-sale retail systems, and microelectronics. The company?s Global Financing segment provides lease and loan financing to end users and internal clients; commercial financing to dealers and remarketers of IT products; and remanufacturing and remarketing services. It serves financial services, public, industrial, distribution, communications, and general business sectors. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. IBM was founded in 1910 and is based in Armonk, New York.
- [By Jim Cramer]When this company talked about lofty EPS for 2015, initially the street was skeptical especially after IBM reported a blah quarter soon after the expectations were laid out. I now think the company has $20 earnings per share capabilities out three years and that $13 is doable for 2011. You keep the multiple the same and you get a $169 stock. I think it does just that. This one’s cheap, way too cheap and it will be cheap next year, too, but on a bigger earnings base which is how it can get to my price target.
- [By Peter Hughes]International Business Machines (IBM) — our aggressive pick for the year — is one of the world’s most dominant technology companies, with annual revenues of $105 billion and net income of $16 billion.
Best Cheap Stocks For 2013: Bank of America Corporation(BAC)
Bank of America Corporation, a financial holding company, provides banking and nonbanking financial services and products to individuals, small- and middle-market businesses, large corporations, and governments in the United States and internationally. The company?s Deposits segment generates savings accounts, money market savings accounts, certificate of deposits, and checking accounts; and Global Card Services segment provides the U.S. consumer and business card, consumer lending, international card and debit card services. Its Home Loans & Insurance segment offers consumer real estate products and services, including mortgage loans, reverse mortgages, home equity lines of credit, and home equity loans. It also provides property, disability, and credit insurance. The company?s Global Commercial Banking segment offers lending products, including commercial loans and commitment facilities, real estate lending, leasing, trade finance, short-term credit, asset-based lending, and indirect consumer loans; and capital management and treasury solutions, such as treasury management, foreign exchange, and short-term investing options. Its Global Banking & Markets segment provides financial products, advisory services, settlement, and custody services; debt and equity underwriting and distribution, merger-related advisory services, and risk management products; and integrated working capital management and treasury solutions. The company?s Global Wealth & Investment Management segment offers investment and brokerage services, estate management, financial planning services, fiduciary management, credit and banking expertise, and asset management products. Bank of America Corporation serves customers through a network of approximately 5,900 banking centers and 18,000 automated teller machines. It was formerly known as NationsBank Corporation and changed its name on October 1, 1998. Bank of America Corporation was founded in 1874 and is based in Charlott e, North Carolina.
- [By Dan Freed]JPMorgan rates Bank of America as an “Overweight,” citing passing of the Fed stress test as confirmation of adequate an capital base and “recent progress on mortgage related issues” and cost restructuring. In the near term, Bank of America should benefit from improved trends in trading, the report argues.
The report added that BofA’s valuation remains “attractive” at 0.7x tangible book.
- [By John Grgurich]To any investors following the financial sector in 2012, it will come perhaps as no surprise that B of A is the year’s top financials performer: moving from $5.81 per share to its year high of $11.61, for a whopping percentage gain of 100.17%. At the height of the financial crisis, in February 2009, B of A’s stock traded for as low as $3.95.
- [By George Putn]In Q4 2010, Buffett sold the rest of his stake of five million shares at an average price of $12.24.
In 2010, the company made a GAAP EPS of -$0.37, which is worse than 2009’s – $0.29. In 2008, that figure was $0.54. Revenues declined by 7.88% to $110.2 billion, after jumping by 64.39% in 2009. The EBT margin improved to 6.61% from 5.98%.
For 2011, the Street expects non-GAAP EPS to be between $1.05 and $1.75. In 2010, non-GAAP EPS was $0.86. Q1 2011 results are released on April 15, and the Street estimates non-GAAP EPS would be between $0.15 and $0.44 with a consensus of $0.26. In comparison, Q1 2010 posted a non-GAAP EPS of $0.28. For Q1 2011, analysts estimate BAC will generate revenues of $26.0B, an increase of 30.84% over the prior year first quarter results. BAC shares trade with a price to sales multiple of 1.2. In its heyday not too long ago, that multiple was in the low 3’s. Investors are waiting to see if the worst is over for Bank of America. There is too much uncertainty swirling about in this mortgage mess due to regulatory uncertainty. However, BofA’s capital ratios have continued to increase as the company has shed noncore assets and riskier loans. If you are a long-term investor, buy BAC while it is at these depressed levels. Otherwise, don’t even touch this with a forty-nine-an d-a-half foot pole.
Best Cheap Stocks For 2013: S&P Smallcap 600(PH)
Parker Hannifin Corporation manufactures fluid power systems, electromechanical controls, and related components worldwide. Its Industrial segment offers pneumatic and electromechanical components, and systems; filters, systems, and instruments to monitor and remove contaminants from fuel, air, oil, water, and other liquids and gases; connectors that control, transmit, and contain fluid; hydraulic components and systems for builders and users of industrial and mobile machinery and equipment; critical flow components for process instrumentation, healthcare, and ultra-high-purity applications; and static and dynamic sealing devices. This segment sells its products to original equipment manufacturers (OEMs) and their replacement markets in the manufacturing, transportation, and processing industries. The company?s Aerospace segment provides flight control systems and components, including hydraulic, electrohydraulic, electric backup hydraulic, electrohydrostatic, and electro -mechanical components for precise control of aircraft rudders, elevators, ailerons, and other aerodynamic control surfaces. It also provides electronics thermal management heat rejection systems, and single-phase and two-phase heat collection systems for radar, ISAR, and power electronics. This segment markets its products primarily to OEMs in the commercial, military, and general aviation markets, as well as to end users. Its Climate and Industrial Controls segment offers systems and components primarily for use in the mobile and stationary refrigeration, and air conditioning industry; and in fluid control applications in various industries, such as processing, fuel dispensing, beverage dispensing, and mobile emissions. This segment serves OEMs and their replacement markets. Parker-Hannifin Corporation markets its products through direct-sales employees, independent distributors, wholesalers, and sales representatives. The company was founded in 1918 and is headquartered i n Cleveland, Ohio.
- [By Putnam]Parker Hannifin (PH) operates in a broadly diversified engineering industry with peers such as General Electric (GE) and 3M Company (MMM). Its products serve aerospace, commercial, mobile and industrial markets.
The 2011 fiscal year was stellar for Parker. An all time record of $12.3 billion in sales was reached, a 23.5% increase. Net income increased a whopping 90%.
The common stock currently trades at a price to earnings ratio of 10.5, below the industry average of 14.8 and historical average of 14. Price to book ratio is 2.02 with price to cash flow being 7.3.
Making comparisons in a broadly diversified industry is difficult, since products and service offerings vary greatly between businesses. Therefore, the peer company’s business lines and products were used as the main selection criteria for peer analysis.
Best Cheap Stocks For 2013: SMTC Corporation(SMTX)
SMTC Corporation provides advanced electronics manufacturing services to original equipment manufacturers (OEMs) worldwide. The company?s services include product design and engineering services, printed circuit board assembly production, enclosure fabrication, systems integration, testing, and configuration services. It also provides enclosure and precision metal fabrication, cable assembly, interconnect, and engineering design services. The company offers its integrated contract manufacturing services to OEMs and technology companies primarily in the industrial, computing and networking, communications, consumer, and medical market segments. SMTC Corporation was founded in 1985 and is based in Markham, Canada.
- [By Paul]SMTC Corp. (NASDAQ: SMTX) is a Canadian company that provides contract electronics manufacturing services, such as surface-mount and through-hole circuit board assembly, product design, testing, packaging and supply chain management. Manufacturers use products built or assembled by SMTC in their computer servers, networking devices or communications products.
In its most recent earnings report, the company said Q3 sales rose 48% in the quarter to $65.4 million, and earnings per share were 16 cents, up from 3 cents in the same quarter of 2009. Eight of its top 10 customers increased orders as a result of strong market demand for electronics manufacturing. The addition of five new clients added $10 million to the company’s sales in the quarter. SMTX’s year-over-year gross profit more than doubled to $7.9 million, as a result. Generated cash flow reached $4.6 million and the company used much of this extra cash to pay down debt. That’s why SMTX’s debt was just $18 million at the end of the quarter, the lowest level in the company’s history.
SMTX is in an excellent position to profit from increasing electronics and technology demand, which will continue to climb next year. Buy SMTX below $4.
Best Cheap Stocks For 2013: Sirius XM Radio Inc.(SIRI)
Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. It broadcasts a programming lineup of approximately 135 channels of commercial-free music, sports, news and information, talk and entertainment, traffic, and weather on subscription fee basis through two satellite radio systems in the United States; and holds an interest in the satellite radio services offered in Canada. The company also simulcasts music and selected non-music channels over the Internet; and offers applications to allow consumers to access its Internet services on mobile devices. As of December 31, 2010, it had 20,190,964 subscribers. In addition, the company designs, establishes specifications, sources or specifies parts and components, and manages various aspects of the logistics and production of satellite radios; licenses its technology to various electronics manufacturers to develop, manufacture, and distribute radios under various brands; and imports radios distri buted through its Websites. The company?s satellite radios are primarily distributed through automakers, retailers, and its Websites. Further, it provides music services for commercial establishments; a satellite television service to offer music channels as part of certain programming packages on the DISH Network satellite television service; music and comedy channels to mobile phone users through mobile phone carriers; Backseat TV, a service offering television content designed primarily for children in the backseat of vehicles; Travel Link, a suite of data services that include graphical weather, fuel prices, sports schedules and scores, and movie listings; and real-time traffic and weather services. The company was formerly known as Sirius Satellite Radio Inc. and changed its name to Sirius XM Radio Inc. in August 2008. Sirius XM Radio Inc. was founded in 1990 and is headquartered in New York, New York.
- [By Louis]Satellite radio broadcaster Sirius XM Radio Inc. (SIRI) is popular among penny stock investors. At $1.83, SIRI is up 67% in the last year, and 20% since mid-January. Investors should also note the company’s quarterly revenue growth of 9% from last quarter.
- [By Tom Bishop]Sirius XM Radio Inc. (SIRI) Sirius has a market cap of $6.86 billion with a price-to- earnings ratio of 44.63. The stock has traded in a 52-week range of $1.10 to $2.44. The stock is currently trading around $1.80. On August 2nd, the company reported revenue of $744 million compared with revenue of $700 million in the second quarter of 2010. Second quarter net income was $173 million compared with net income of $15.3 million in the second quarter of 2010.
One of Sirius XM’s competitors is Westwood One Inc. (WWON). Westwood One is currently trading around $4 with a market cap of $89.73 million and a negative price-to -earnings ratio.
Sirius XM has been in an upward trend. In the second quarter, the company increased net income by 1,013% from the second quarter of 2010. In 2010, the company announced that it had increased its annual net income by $572.2 million, when it reported its first ever profit of $43.1 million. The company has completed building its infrastructure and should be able to reduce costs. The company recently reaffirmed its guidance of 10% revenue growth and free cash growth of 75%. Sirius XM has a lot of debt but should be able to pay down debt with the additional cash. Investors like what they see in Sirius and have bid up the stock price by 62% over the last 52 weeks. Additionally, we don’t see Pandora (P) as a serious threat. I rate Sirius XM Radio Inc. a buy.
- [By Michael Brush]Howard Stern lemmings piled into Sirius stock years ago when the shock jock moved his circus to satellite radio. Many lost almost all their money, as the company’s stock fell under $1 from above $8.
But with a 2008 buyout of XM Radio and a bankruptcy scare under its belt, Sirius XM Radio (SIRI) is now a dominant force on the comeback trail.
Skeptics believe iPods and free Web radio services like Pandora will jam the signal at Sirius, which charges $12.95 a month. But satellite radio offers content that listeners can’t find elsewhere on the radio — not only Stern, but also Martha Stewart, Oprah Winfrey, Jamie Foxx, Barbara Walters and a Playboy channel, to name a few.
And recent trends confirm that drivers are willing to pay for that content. Sirius XM Radio’s subscriber base grew last year by 8%, to 20.2 million. That helped drive revenue up 14%, to $2.82 billion. “It’s kind of like the original cable TV, when everyone thought people wouldn’t pay for TV because it’s free,” says Robert Routh, a media analyst at Phoenix Partners. “Sirius XM Radio has lot of stuff you can’t get elsewhere.” The reason: While terrestrial radio companies lack the funds to buy the big talent, Sirius XM Radio can buy wh atever it wants to fill its 135 channels, says John Tinker, an analyst with Maxim Group.
Two other keys to growth: Sirius XM Radio is available for free for a few months in 60% of all new cars. As car sales rise in an improving economy, subscriber growth should increase. A Sirius 2.0 upgrade and a possible rate increase later this year will also drive gains. All-important cash flow could hit $1 billion a year by 2015, predicts Morgan Stanley analyst David Gober. He says Sirius XM Radio will be announcing dividends and share buybacks — music to investors’ ears
Best Cheap Stocks For 2013: Lionbridge Technologies Inc.(LIOX)
Lionbridge Technologies, Inc. provides language, development, and testing services. Its Global Language and Content segment provides product localization services, such as creating foreign language versions of its clients? products and software applications, including the user interface, online help systems, and documentation; and content translation services, such as translating and maintaining clients? Web-based content, eLearning courseware and training materials, technical support, and sales and marketing information. It also offers technical authoring, eLearning courseware development, and production and integration of content; and global language and content services delivery. The company?s Global Development and Testing segment develops and maintains on-premise, SaaS, and smart phone and tablet applications, as well as provides Web production services. This segment also offers various testing services under the VeriTest brand, including managed test teams, test proc ess design, test automation, functional testing, performance testing, globalization testing, and product certification. In addition, it provides specialized search relevance, online content editorial, keyword optimization, and related services. Its Interpretation segment offers interpretation services for government business and healthcare organizations that require experienced linguists to facilitate communication. It provides interpretation communication services, such as onsite interpretation, over-the-phone interpretation and interpreter testing, training, and assessment services in approximately 360 languages and dialects. The company serves the technology, mobile and telecommunications, Internet and media, life sciences, government, manufacturing, automotive, retail, and aerospace sectors in the Americas, Europe, and Asia. Lionbridge Technologies, Inc. was founded in 1996 and is headquartered in Waltham, Massachusetts.
- [By Vodicka]Lionbridge Technologies (NASDAQ: LIOX) provides language, development and testing services to businesses all over the world. Its focus is on technology, and it helps its clients manage their enterprise content and technology applications, and supports those efforts with training materials, as well as sales and marketing information. By affecting optimal communication in local languages, it helps its clients capture market share, escalate adoption of their global content and products, increase the return on their enterprise application investments and boost workforce productivity. All while reducing costs! So it’s no wonder that the 10 largest software companies and the five largest Internet portals in the world use LIOX to help them internationalize their products and services.
This strong customer base helped the company weather the recession, as its top 10 customers expanded their business by more than 8% in the fourth quarter over the third quarter. This helped the company generate $11.7 million in cash flow, improve its gross profit to 33.5% and revenues grow 7% quarter over quarter. That’s definitely a great sign, especially since technology spending is taking flight, and globalization of industry is in a rapid phase of expansion. Buy LIOX under $4.50.
Best Cheap Stocks For 2013: Lattice Semiconductor Corporation(LSCC)
Lattice Semiconductor Corporation designs, develops, manufactures, and markets programmable logic products and related software. The company offers field programmable gate array (FPGA) products, including LatticeECP family for deployment in wireless infrastructure and wireline access equipment, as well as in video and imaging applications; and LatticeXP for the security, surveillance, and display markets. It also provides programmable logic device (PLD) products comprising various versions of ispMACH4000 in-system programmable complex programmable logic device family; MachXO family that is designed for a range of low density applications; platform manager, power manager, and ispClock programmable mixed signal devices; and software development tools and intellectual property cores. The company sells its products directly to end customers through a network of independent manufacturers? representatives and indirectly through a network of independent sell-in and sell-through distributors. It primarily serves original equipment manufacturers in the communications, computing, consumer, industrial, military, automotive, and medical end markets. The company was founded in 1983 and is headquartered in Hillsboro, Oregon.
- [By Nancy Zambell]A survivor of the tech boom and bust cycle, Lattice Semiconductor Corp. (NASDAQ: LSCC) has managed to consistently grow its new product revenue by 28% per quarter since 2006. And that astounding figure includes one of the worst recessions in our history, as well as a downturn in the semiconductor market. The company’s primary customers are original equipment manufacturers (OEMs) in the communications, computing, consumer, industrial, automotive, medical and military end markets. Its strongest markets include the fastest-growing segments in our economy today.
LSCC intends to focus on aggressively expanding its mid-range markets, as well as its products for lower-power, lower-cost applications. It also plans to continue targeting customized solutions for its customers, all the while, continuing to increase its flow of new product growth and entry into new markets.
Best Cheap Stocks For 2013: Oracle Corporation(ORCL)
Oracle Corporation, an enterprise software company, develops, manufactures, markets, distributes, and services database and middleware software, applications software, and hardware systems worldwide. It licenses of database and middleware software, including database management software, application server software, service-oriented architecture and business process management software, data integration software, business intelligence software, identity and access management software, content management software, portals and user interaction software, development tools, and Java; and applications software comprising enterprise resource planning, customer relationship management, enterprise performance management, supply chain management, business intelligence applications, enterprise portfolio project management, Web commerce, and industry-specific applications software. The company also offers customers with rights to unspecified software product upgrades and maintenance releases; Internet access to technical content; and Internet and telephone access to technical support personnel. In addition, its hardware systems products consist of computer server and hardware-related software, including the Oracle Solaris Operating System; and storage products, such as tape, disk and networking solutions for open systems and mainframe server environments. Its hardware systems support solutions include software updates for the software components. Further, the company offers consulting solutions in business and IT strategy alignment, enterprise architecture planning and design, initial product implementation and integration, and ongoing product enhancements and upgrades; cloud services, including Oracle Cloud Services and Advanced Customer Services; and education solutions comprising instructor-led, media-based, and Internet-based training in the use of its software and hardware products. The company was founded in 1977 and is headquartered in Redwood Ci ty, California.
- [By Goodwin]Oracle (ORCL), a software enterprise company, is the only Overweight-rated company in this market segment. With the introduction of a new Exadata product line, Oracle is set to enjoy a positive secular trend. Its current market price of $29.58 has fluctuated in the range of $24.72 to $36.50. Earnings per share of $1.76 have been posted and market capitalization stands at $149.47 billion. Its recent P/E ratio was 16.88x and the company showed a net profit margin of 23.99%.