With stocks down in the past few weeks, it could be reasonable to look for low priced stocks. These would be stocks that have little downside risk since they trade at low prices. These would also be the stocks that statistically have the highest probability of delivering a large gain in the next quarter.
One study looked at how low priced, or cheap, stocks performed relative to more expensive stocks. The study found that cheap stocks delivered more than six times the average return of the more expensive stocks in a typical quarter.
That’s why we started our search for potential bargains by focusing on stocks priced at less than $5 per share. The reason we like cheap stocks is because these are the ones that have been proven to be most likely to deliver large gains.
Then, we looked for stocks that are beaten down and at least 50% below their 52 week high. These stocks have already suffered steep sell offs and could be in the process of bottoming. To look for a possible bottom, we required the stocks to be near a 20-day high.
Finally, we added a liquidity filer, requiring significant volume which we defined as at least 50,000 shares and some degree of institutional interest with at least one recent buy.
One way to find stocks meeting these requirements is with the free stock screening tool available at FinViz.com. At this site, you could screen for a variety of fundamental factors, high levels of institutional ownership and bullish institutional transactions. An example is shown below.
Three Stocks Meet Our Strict Requirements
Remember, there is no guarantee any stock will increase in value. Also, it is important to remember when we search for stocks using quantitative measures, our goal is to identify stocks that meet those criteria. The screens we develop could be used as the cornerstone of long term investment strategies but any individual stock in the list could be a winner or loser.
Advantage Oil & Gas Ltd. (NYSE: AAV) acquires, exploits, develops, and produces natural gas in the Province of Alberta, Canada. The company primarily focuses on the development and delineation of its Montney natural gas and liquids resource that includes 200 net sections of land in Glacier, Alberta.
It provides natural gas and natural gas liquids primarily through marketing companies. The stock has been in a sharp down trend but could be bottoming.
Analysts expect earnings per share of $0.13 this year and more than $0.21 in each of the next two years. At about 15 times expected earnings, the stock is relatively cheap.
Southwestern Energy Company (NYSE: SWN) engages in the exploration, development, and production of natural gas and oil in the United States. It operates through two segments, Exploration and Production, and Midstream.
The company focuses on the Marcellus Shale, an unconventional natural gas reservoir covering approximately 191,226 net acres in Northeast Appalachia; Marcellus Shale, Utica, and Upper Devonian unconventional natural gas and oil reservoirs covering approximately 290,291 net acres in Southwest Appalachia; and the Fayetteville Shale, an unconventional natural gas reservoir covering approximately 917,842 net acres in Arkansas.
It also holds interest in properties located in Colorado and Louisiana. In addition, the company engages in gathering, marketing, and transporting natural gas, oil, and natural gas liquids (NGLs). The company also has a pipeline of 2,045 miles and 16 miles in Louisiana in its gathering systems.
The company’s estimated proved natural gas, oil, and NGLs reserves comprise 14,775 billion cubic feet of natural gas equivalent (Bcfe); and 6,855 Bcfe of proved undeveloped reserves.
This stock has been searching for a bottom for some time.
Earnings per share are expected to grow from $0.77 this year to $0.87 next year and $0.98 the following year. If the company meets expectations, as it did last quarter, the stock could more than double. At just 1.1 times book value, the stock seems to carry little downside risk.
Tetraphase Pharmaceuticals, Inc. (Nasdaq: TTPH) a clinical-stage biopharmaceutical company, develops various antibiotics for the treatment of serious and life-threatening multidrug-resistant infections. The company’s lead product candidate is eravacycline, a synthetic fluorocycline intravenous and IV antibiotic for use as a first-line empiric monotherapy to treat resistant and multidrug-resistant infections, including multidrug-resistant Gram-negative infections.
The company conducted Phase III clinical trials with eravacycline through investigating Gram-negative infections treated with eravacycline (IGNITE).
The company has also completed IGNITE1 and IGNITE4, a Phase III clinical trial evaluating the safety and efficacy of eravacycline with IV administration for the treatment of complicated intra-abdominal infections; IGNITE2, a Phase III clinical trial evaluating the safety and efficacy of eravacycline with IV-to-oral transition therapy for the treatment of complicated urinary tract infections (cUTI); and IGNITE3, a Phase III clinical trial evaluating the safety and efficacy of eravacycline with IV administration for the treatment of cUTI.
It is also developing TP-271, a synthetic broad-spectrum fluorocycline that is in Phase I clinical trial for respiratory diseases caused by bacterial biothreat pathogens; and TP-6076, a synthetic fluorocycline derivative, which is in Phase I clinical trial for multidrug-resistant Gram-negative infections.
Tetraphase Pharmaceuticals, Inc. has a license agreement with Everest Medicines Limited to develop and commercialize eravacycline for the treatment of complicated intra-abdominal infections and other indications in mainland China, Taiwan, Hong Kong, Macau, South Korea, and Singapore.
Despite the large number of potential products, the stock has been trading at a low level for several years.
This can be viewed as possible proof the company is able to survive and is just one piece of good news away from returning to its old highs.
Any of these stocks could be a potential winner and all worth further research. If you are uncomfortable doing your own research, there is a TradingTips.com trading service, Triple-Digit Returns, which uses a very specific system for choosing the right stocks to trade.
Triple-Digit Returns looks for companies that are misunderstood and potentially undervalued, lost darlings, mergers or spinoffs that could benefit share holders, or companies that show signs of strong interest by insiders who know the company best and see value.
This service provides a recommendation once a week. It could be used for trading or learning how to analyze stocks since each recommendation includes a detailed explanation of the company. To learn more, you can click here.