5 Big-Cap Bargains

 | Apr 19, 2013 | 2:00 PM EDT  | Comments
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The average big-cap stock is up more than 11% in the past 52 weeks, but in the past few days a few large, well-known stocks have hit 52-week lows. Almost all these unpopular shares are buys at current prices.

Apple (AAPL): I will be brief to the point of curtness because my fellow Real Money columnists have written extensively about Apple. But here we have a company with a rich tradition of innovation, debt-free, selling for less than 9x earnings. If you buy below $400 a share, you will be happy a year hence.

Apache (APA): This oil and gas exploration-and-production company is undervalued, I believe. If analysts have it right, this year will be Apache's second best ever, with more than $9 a share in earnings. Next year will be better yet, with more than $10 a share in earnings, though that would still be below the peak figure of $11.47 in 2011. At about $70, Apache's stock price is almost exactly half of the peak price, which was about $142 in mid-2008. The shares fetch only 7x earnings and are trading below book value. I don't think you have to be a big energy bull to like Apache at these levels.

Freeport-McMoRan Copper & Gold (FCX): Mining shares have been taking it on the chin lately, including Freeport-McMoRan, which has fallen 18% this year in an up market. Copper prices allegedly predict economic trends, and lately the falling price of copper suggests a gloomy outlook. Investors seem to anticipate a slowdown in China, stagnation in Japan, continued recession in Europe and a wobbly recovery in the U.S. I, however, foresee a robust recovery in the U.S. and an upturn in Europe beginning next year. If I'm right, Freeport will be able to continue its dividend of $2.44 a share, which affords a 4.5% yield. And the shares, recently about $28, could tack on another $10 or so in capital appreciation.

Newmont Mining (NEM): I held Newmont, the largest U.S. gold miner, personally and for clients last year. It did poorly, and I sold it earlier this year. But after falling 31% in the past 12 months, Newmont stock may surprise the skeptics. Only 44% of analysts rate it a Buy. But it looks attractive to me at 9x earnings, with a dividend yield around 5%.

Alcoa (AA): This one I'm less keen on. Alcoa hasn't broken $1 a share in earnings since 2007. If analysts are right, it will be 2015 before it does so again. Return on equity last year was a paltry 1.8%. At about $8 a share, it may be a little underpriced, but there are better bargains around.

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