3 Blue-Chip Stocks Near their 52-Week Lows: Are They a Bargain?
Dubbed a Superinvestor by Warren Buffett, Walter Schloss was known to be a deep value investor. Schloss was very keen in stocks that were selling at 52-week low prices.
In Singapore, even among the well-known companies in the Straits Times Index (SGX: ^STI), there are a few stocks that are flirting with their respective 52-week low prices.
Let’s take a look at three of them today, starting with the stock that is closest to its 52-week low price.
The world’s second largest land transport company, Comfortdelgro Corporation Ltd, reported its earnings for the second quarter of 2017 last week. Things are certainly not looking good.
For the three months ended 30 June 2017, revenue came down 3.4% year-on-year to S$987.2 million while net profit tumbled 6.8% to S$79.4 million. All its business segments brought in lower sales except the Public Transport Services division and the Driving Centre division.
The company ended off its second quarter results announcement by saying that its “operating environment remains challenging and costs will continue to be managed prudently”.
Over at StarHub, quarterly revenue came down 1% year-on-year to $579 million, due to weaker mobile, pay TV and broadband sales. Meanwhile, net profit tumbled 21% year-on-year to S$85.7 million.
Consequently, its diluted earnings per share fell 19% to 5.0 cents. Shareholders will receive 4.0 Singapore cents per share as dividends for the latest quarter, down from the five cents paid out a year ago.
StarHub expects prolonged competition in its broadband business and challenges from alternative viewing options for its pay TV business.
Moving on, Sats Ltd provides inflight catering, institutional catering, and airport terminal services, among others.
For its first quarter, the firm reported a 0.5% year-on-year revenue increment to S$426.5 million, but net profit declined 10.6% to S$57.3 million. The lower profit was mainly due to an absence of a gain on the sale of certain assets that took place in the first quarter of the previous year.
Sats said that there is no indication that low yields across the airline industry will improve in the near term, so pricing pressure is expected to continue. Since the company derives the majority of its revenue from the aviation sector, investors should keep a lookout on developments in this area.
The Foolish Bottom Line
Just because a blue-chip company is selling at a 52-week low price, it does not mean it is a screaming buy.
Investors must delve deeper to see if there are any structural changes to the company or the share price weakness is a temporary affair. If it is the former, it would be prudent to give the company a miss. If it is the latter, the low share price may offer a great opportunity for contrarian investors.