By John Elam
With questions of the euro zones future splitting the headlines with the death of longtime North Korean dictator Kim Jung Il, investors are rightfully cautious as to where they are putting their savings today. For investors wanting to avoid penny stocks but still looking to bring home a fair number of shares for their money, stocks under $20 offer a balance of both bigger names with significant potential for upside. Today we will look at a broadcasting company, a document company, retail and commercial bank, security brokerage firm, and an equipment manufacturing company. All of these stocks have been rated a "buy" by mainstream analysts. Please use my research as a starting point for your own due diligence.
First up on the chopping block is Applied Materials Inc. (AMAT), currently trading at $10.13, right at the bottom of its 52 week range of $9.70 to $16.93. One of the things I like most about this stock is its quarterly cash dividend, currently pegged at $.08 per share, which gives investors quarterly returns just north of 3%. Looking deeper into AMAT’s financials we see that the company’s 2011 fiscal balance sheet has strengthened over its 2010 sheet in several key categories. Net sales were up $968 million, a 10.13% increase over last year’s figure, helping to drive a 107% increase in earnings per diluted share. A non-financial upside that I found relevant was the customer base for AMAT. Almost 81% of sales come from Asian markets, with China and Taiwan taking the lead with 24% and 20% respectively, and a good sign for investors looking for more eastern exposure. In the news recently AMAT announced that it has developed the “First Fully-Autonomous Defect Review SEM”, a product aimed at allowing chip makers the capacity to automatically correct chip defects. These corrections occur not only more rapidly but more accurately and potentially far more financially efficient than the current alternative of human manipulation. While I like the rate of return provided by the dividend any increase in value will dramatically drop this rate and I don’t see the stock poised for any tremendous potential upside in the near future, all leading to a conclusion that there are certainly better options out there.
Broadcasting Company Sirius XM Radio Inc. (SIRI) trading at $1.82, sits in the middle of its 52 week average of $1.27 to $2.44. Looking at revenue streams for the first nine months of the year SIRI continued to gain traction with subscribers, raising revenue from this channel by 7.2%, to $1.92 billion. While net income per common share diluted remains low at $0.05, it more than doubles last year’s figure of $0.02 during the same 9 month period. SIRI needs to continue this trend to obtain a reasonable ratio, even if share values continue to remain low. Continuing to pay off debt will benefit shareholders in the long term, however for investors looking for cash payments SIRI offers no dividends today and with the high level of debt it does not appear that it will be in a position soon to offer one. SIRI announced recently that for the first time ever that it would announce play by play live coverage of every bowl game including the BCS national championship. This is a continued sign of SIRI advancement to provide its subscribers with seemingly endless content options. While there are reasons to see a future for investors in SIRI, most indications are that that bright point is still some time off.
Founded in 1906, Xerox Corporation (XRX) is currently trading at $7.73, near to the bottom of its 52 week average which is shifting between $6.55 and $11.92. Financially XRX has not seen significant growth during the third quarter or the first three quarters of fiscal year 2011. Compared to the same period a year ago, during the fiscal third quarter of 2011 XRX experienced total revenue growth of just 2.86%, reaching $5.58 billion for the quarter. XRX pays out a dividend quarterly, currently pegged at $.04 per share, and at its current price yields 2.13%. While the firm lowered its liabilities by over $800 million in the first nine months, total liabilities remains high at just over $17.27 billion dollars. In the news, XRX and companies owned by it, are working to help governments lower the cost of operating in an era of tight budgets in areas such as attendance at child care programs to electronic tolling. I like XRX in the medium range. While their debt levels remain high, substantial asset levels and revenue from operations erodes some of this negative positioning. Finally, while the dividend alone is not sufficient to attract investors, it will help until returns from share value are found.
Commercial and retail banking company First Niagara Financial Group Inc. (FNFG) is only barely above its 52 week low of $8.22 at $8.30 and well below its high of $15.10. Total assets during the first nine months of the fiscal quarter increased by 48%, to over $31.2 billion, while total liabilities increased 48.5% to $27.2 billion. The company appears to, despite high debt levels continue its interest in accruing additional firms including NewAlliance Bancshares Inc along with HSBC bank USA branches. These purchases are being made possible by the issuance of additional debt, as recently as the 8th of December totally $300 million. FNFG faces high levels of debt, a situation that if backed by significant assets could be justified, but amidst continued low interest rates and fluctuating asset values, debt levels in this case appear to be excessive.
Looking at the securities brokerage firm TD Ameritrade Holding Corp. (AMTD) we see it trading at $14.99, only a $1.56 above its 52 week low of $13.43 and well below its 52 week high of $22.90. Looking at fiscal 2011 data versus 2010 we see relevant increases in both net revenues, net income and diluted earnings per share. Net revenues during fiscal 2011 jumped 7.88% to $2.76 billion and net income jumped 8.54% to $1.05 billion. During the same period diluted earnings per share jumped 11% to $1.11. With quarterly dividends now at $.06 per share per quarter, or at 1.55% annually, investors should not but be over zealous, but should certainly not be angry as regular dividends have only recently come to be at AMTD. Work to streamline the process of adding new clients more rapidly has been aided by the development of "triple play," which involves three core segments; DocuSign, Laser App and Veo®, and each are aimed to help reduce the time taken to sign new customers. I like AMTD in the long and mid-range. Strong increases in revenue, increases in earnings per share, and the addition and increase in dividends are indications that that AMTD may just temporarily be this low.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
