Value hunting: 11 stocks making 52-week lows (and two that pass a top investor's filters)
A closer look at the phenomenon of a 52-week low and potential opportunities in the value bin.
Source: iStock
Mentioned
KEY POINTS
- Stocks that hit 52-week lows earlier this month continued to drift lower
- In parallel, the ASX 200 is down around 3.5% from recent highs
- 11 larger cap stocks hit 52-week lows in recent days, do any of them pass the Wiley's filters
Welcome back to another 52-week low series where we trawl through some of the market’s most discarded and disliked companies.
Market Index’s 52-week lows scan shows users which companies are making 52-week lows on the given day.
In my first article, we reviewed The 52-Week Low Formula by Luke Wiley, Senior Vice President of UBS. His five key criteria (and in that order) include:
Durable competitive advantage
Required minimum free cash flow yield (above 10-year Treasury yield)
Return on invested capital greater than cost of capital
Free cash flow to long-term debt ratio of less than three
Trading below historic and recent high prices, more sellers than buyers
Stocks that made 52-week lows
Note: This is the list of stocks that featured in the 52-week low article on February 6. Thinly traded stocks were excluded, performance since 52-week low uses February 6 as a reference point.
Key takeaways
Dip buying would've hurt: The average stock is down -8.4% from our reference date of February 6th. We're also in the midst of earnings season, which might be a catalyst behind the underperformance of these stocks.
Wiley's filters: There were two stocks that passed two of Wiley's filters (cashflow yields and long-term debt to cashflow): Elders and OFX Group. But they didn't perform that well either, down 6.9% and 7.1% respectively. Taking a closer look:
Elders: The stock copped a -23% selloff after its FY22 results on 14 November flagged a cautious outlook amid adverse weather events and softening soft commodity prices. Longstanding CEO Mark Allison also announced his retirement. Still, there's a perception that agriculture remains a stable sector. Interestingly, the stock abruptly fell -5.9% on more than 500% 20-day average volumes on February 8th. This was in parallel with two investor briefings with a number of institutional investors.
OFX: The online foreign exchange and payments company experienced a similar -17.8% fall between 24 to 30 January after a December quarter update flagged softening transactions among higher value customers. There's been no market sensitive announcements since then, and the stock has quietly drifted lower.
Broader market weakness: Coincidentally, the reference date was when the ASX 200 peaked and down -3.6% since. Perhaps the health of the broader market takes precedence over the filters, as even the best bargain bin names might struggle amid the pullback.
New stocks making 52-week lows
Ticker | Company | 1 Yr Return | Profitable? |
|---|---|---|---|
Santos | unch | Yes | |
Regis Healthcare | -13% | Yes | |
Objective Corp | -20% | Yes | |
Capitol Health | -24% | Yes | |
Michael Hill International | -30% | Yes | |
Dicker Data | -41% | Yes | |
Trajan Group | -50% | Yes | |
Baby Bunting | -54% | Yes | |
West African Resources | -15.% | Yes | |
Cooper Energy | -38% | No | |
Hastings Technology | -47% | No |
Wiley's filters
Among the profitable companies, only two made it through two of Wiley's filters: Required minimum free cash flow yield (greater than 10-year Treasury yield) and free cash flow to long-term debt ratio (less than 3).
That being: Santos and Regis Healthcare.
Note: The data is based on the latest full-year result
Ticker | Cashflow yield | Long-term debt/cashflow |
|---|---|---|
REG | 26.21% | 0.88 |
STO | 22.78% | 0.84 |
BBN | 13.06% | 3.66 |
MHJ | 7.69% | 3.22 |
WAF | 4.11% | 0.52 |
OCL | 2.80% | 5.41 |
CAJ | 1.10% | 22.87 |
DDR | 0.79% | 5.49 |
