With the market staging its best year since 1997, it's hard to find stocks that have not worked in the past year. Most of what's on the 52-week-low list is still up but just at the low end of their ranges. I confess it's gratifying to see many of the large real estate investment trusts on the list because it's a group I warned about previously. REITS like AvalonBay (AVB) and Simon Property Group (SPG) finally reached the point where over-valuation overcame popularity. As nice as that is, it's still not providing the type of opportunities we hope to find on the new-low list. There are few huge losers (outside of the gold and silver mining industry) as we enter 2014.
I took the list a little further to see what's lurking on the list of stocks trading near three-year lows and used GuruFocus.com to see who snapped up these shares after an extended period of underperformance. There are interesting stocks on the list that have lagged the market and look like bargains for patient, long-term investors.
EXCO Resources (XCO) is back near the lows of 2009 as weak natural gas prices have weighed heavily on the stock. In addition, the market didn't think much of its recent deal with Kohlberg Kravis Roberts (KKR) regarding its Eagle Ford and other Texas properties. But the company is sitting on prime acreage in Eagle Ford and along the Buda fields in Texas, and it could see strong recovery over the next several years. Wilbur Ross, Howard Marks and other incredibly smart investors hold good-sized stakes EXCO and seem to be making a long-term bet on natural gas. Ross and Prem Watsa recently backstopped a rights offering to raise capital for new drilling projects. This company turned down a takeover offer at almost 4x the current price a few years ago, and I suspect the company is worth a lot more than the current quote.
Banco Santander Brasil (BSBR) is on the three-year low list. The Sao Paulo-based bank has been weak, along with the Brazilian economy and equities market. The stock trades around tangible book value and yields 4.7% at today's price. The stock is a good play on an eventual Brazilian recovery and it has drawn the attention of very smart value investors such as Tweedy Browne, Charles Brandes and Caxton Associates. The bank has the most exposure to Brazil's consumers and it should be a beneficiary of the larger middle class that developed in the previous economic boom.
Penn West Petroleum (PWE) is another stock trading at three-year lows and it appears to have significant turnaround potential over the next few years. The company recently announced that it sold $486 million of non-core assets as part of its effort to refocus its core assets and strengthen the balance sheet. The stock trades at less than 60% of book value and sports a 6.2% dividend yield at the current price. Funds managed by noted investors such as Charles Royce and Jean-Marie Eveillard have bought shares in the past year. Several officers and directors also snapped up large blocks of Penn West stock in the past six months.
Despite the almost-meteoric rise in Japanese stocks last year, office equipment and camera maker Canon (CAJ) has been a laggard. The company has struggled as the office-equipment industry is incredibly competitive and the camera business continues to lose share to smartphone cameras. I'm not ready to pull the trigger on this one as the stock still trades at 1.5x book value, but value types like David Dreman, John Hussman and John Rogers have been buying the stock. The company is debt free with decent cash position so it should be a long-term survivor and eventually see its stock price recover from current levels. Meanwhile, the shares pay a dividend of 3.3% at today's price.
The list of new lows, whether its 52 weeks or 156 weeks, is short after the strong performance of the equity markets, but there are still a few bargains to be had. It makes sense for investors to dig through them in search of diamonds in the rubble.
