MOTR, AONE, CLWR: Buying Trough Stocks to Beat European Blues
Selecting the right stocks in what appears to be a perennially fragile market is a tough call. Choosing momentum stocks is one way to play the situation but one is never sure when the wind will be taken out of their sails. Buying trough stocks can be a good strategy if one is not too sure about selecting momentum stocks. Motricity Inc (NASDAQ: MOTR), A123 Systems Inc (NASDAQ: AONE) and Clearwire Corporation (NASDAQ: CLWR).
While this approach can often lead investors getting stuck with stocks in a downward spiral and at prices which take a couple of months to recover – effectively becoming value traps. However, having already dropped significantly, these stocks are no longer falling knives and thus the chances of further losses are limited. At the same time, these stocks can actually outperform broader markets going forward as value buying emerges at lower levels. Clearwire Corporation (NASDAQ: CLWR) is a perfect example which has often fought back to higher levels on the back of any positive development.
To contemplate a recovery in the stock from current levels is not very difficult as most of the negatives seem to have been factored in equity prices and the fundamentally positive developments specific to the US economy have been completely ignored by the markets. Clearly, the markets are in an oversold situation and it would not be difficult for them to register a sharp bounce back. And the stocks which got beaten down the most would be the prime beneficiaries such as CLWR. The stock hit a new 52 week low on Friday but recovered somewhat to close at $1.47.
Motricity Inc (NASDAQ: MOTR), which is a provider of mobile data solutions and services to wireless carriers, is also in the same boat having dropped 25 per cent in the previous month. At $1.33, the stock is now trading at dangerously close levels to its book value per share which is not a very good indicator of a company’s assets which deals in a lot of intangibles such as MOTR. This effectively means that investors are getting the entire intellectual capital virtually free by paying the price of hardware. Similarly, A123 Systems Inc (NASDAQ: AONE), trading at $2.3, is well below its book value of $2.8. Although it is a company in a physical asset heavy industry, there is a great deal of intellectual assets involved as well. Arguably, these stocks would not remain at such low levels forever and it would just need a certain degree of sanity coming back in the markets.
Do NOT buy or sell AONE, CLWR or MOTR until you have read everything.
SmallCap Network provides comprehensive research and opinions on AONE, CLWR and MOTR. |
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| Date: | June 19, 2013 | |
| Price: | Free | |
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