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Alberto Abaterusso
Alberto Abaterusso
Articles (1476) 

Will These Falling Knives Rebound in 2019?

Century Aluminum, Core Molding could make a comeback this year

March 11, 2019 | About:

Investors who want to increase their odds of finding a cheap stock that has high potential for outperforming the S&P 500 index should screen for falling knives.

Falling knives are stocks that have declined more than 59% in the last 52 weeks of trading.

Since a sharp depreciation in the market value of a stock can be a sign of financial distress,  this process involves the risk of generating severe losses. If investors add a moderate to low debt-equity ratio to their screening, however, they can significantly reduce the risk.

Further, to increase the likelihood of gaining impressive returns, investors should search for value among basic materials stocks because the sector is poised for a rebound as the U.S. and China are expected to reach a trade agreement by the end of March.

The screening produced the following results. 

The first stock is Century Aluminum Co. (NASDAQ:CENX), a Chicago-based producer of standard-grade and value-added aluminium.

Shares closed at $7.64 on Friday following a 63% decline over the past year through March 8. The company has a debt-equity ratio of 37% versus an industry median of 34%.

GuruFocus has assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 4 out of 10.

Century Aluminum has a market capitalization of $678.4 million.

The closing price on Friday was below the 200, 100 and 50-day simple moving average lines. The 52-week range is $6.54 to $22.94.

The company has a price-book ratio of 0.89 versus an industry median of 1.62 and an enterprise value-to-earnings before interest, taxes, depreciation and amortization ratio of 21.99 compared to an industry median of 8.71.

Wall Street issued an overweight recommendation rating for Century Aluminum, which means the stock is expected to outperform either the market or the industry. The average target price of $11.29 reflects a nearly 47% upside from the closing price on Friday.

The 14-day relative strength index of 32.76 suggests the stock is close to oversold levels.

The second company is Core Molding Technologies Inc. (CMT), a Columbus, Ohio-based manufacturer of sheet molding compound products and fiberglass reinforced plastics.

Shares closed at $7 on Friday following a 60% decline for the past 52 weeks through March 8. The stock has a debt-equity ratio of 41% versus an industry median of 52%.

GuruFocus has assigned a rating of 5 out of 10 for financial strength and for profitability and growth.

Core Molding has a $57.42 million market cap.

The closing price on Friday was below the 200, 100 and 50-day SMA lines. The 52-week range is $6.37 to $19.87.

The company has a price-book ratio of 0.54 versus an industry median of 1.26 and an EV-EBITDA ratio of 9.49 versus an industry median of 8.37.

The 14-day relative strength indicator of 24.66 suggests the stock has reached oversold levels.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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Comments

annabailey
Annabailey - 2 months ago    Report SPAM

nice post

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