eirmoney | Stock Picks for Long-Term Value and Growth Investors

Stock Picks for Long-Term Value and Growth Investors

Posted by Emil Okanovic | 12 October 2009

Equities around the world have had stellar performance so far this year. Most have recovered fairly well since the market hit the bottom in the spring this year. In fact, many investors have used the beaten down stock prices to acquire shares in some promising companies for their portfolios. If you are one of the investors seeking long-term value and growth stocks, here are some recommendations. These are picks are from the U.S. which seems to be leading the developed world out of recession.

Ameren Corporation (NYSE : AEE)

...is an electric and natural gas utility company, operating transmission and distribution networks in Illinois and Missouri. Even though company’s pricing is subject to heavy government regulation, which has most often worked to the benefit of the customers, Ameren has been able to stage a robust performance and to provide high yield for its investors. This company, with 5.42 billion market capitalization, has the ratio of its enterprise value to revenues of 1.85 (on a trailing twelve months basis) and enterprise value to EBITDA ratio of 6.5. Ameren’s stock is currently trading at $25.28, which is about 30% of the bottom hit in March. The company pays am annual dividend of 1.54%, yielding 6.1%, which can beat other types of income yields in the current environment characterized by low rates of inflation. Ameren’s stock is also fairly priced, with a trailing P/E ratio of 9.5 and price-to-sales and price-to-book ratios of only 0.72 and 0.76, respectively.

Mueller Water Products, Inc. (NYSE : MWA)

...is Atlanta, GA-based manufacturer of water infrastructure and flow control products for use in water distribution networks and facilities. The company sells its products to residential and local government markets. This $637 million company in terms of its market capitalization has enterprise value-to-revenue ratio of 0.95 (trailing twelve months basis) and enterprise value-to-EBITDA ratio of 10.4. Given the dire conditions in the U.S. residential market, the company’s share price plunged nearly 70% from its peak in 2006. While the prices have nearly trebled from their bottom, to $5.53, they still remain well below their previous peak. Yet, this company pays an annual dividend of $0.07, yielding about 1.3%; moreover, the company’s price-to-sales ratio is especially low, at 0.39. Given that the residential housing market in the United States is likely to bottom within the year or so, this company stands to benefit from the expected recovery in housing construction.

Superior Well Services, Inc. (Nasdaq : SWSI)

...provides technical pumping and surveying services to oil and natural gas companies. SWSI, with the market cap of $230.4 million, is included in the S&P 600 Small Cap Index. The stock currently sells for $9.15, which is 122% higher than the bottom hit in March. Superior Well Services’ stock price-to-sales ratio is at a low 0.42 and its price-to-book ratio is currently 0.75. Given the prospects for a higher demand for energy amid the depleting existing oil reserves, this company will benefit from increased oil and natural gas exploration and exploitation in the future.

EMCOR Group (NYSE : EME)

...is electrical and mechanical engineering and facilities construction Services Company that produces electrical, lighting, air conditioning, heating, fire protection and power generation systems. This company has a market capitalization of some $1.7 billion. Its stock is currently trading at 24.25% with a low average P/E of 8.9 and price-to-sales ratio of 0.27. EMCOR Group has a very healthy balance sheet, producing a 6.8% return on assets and 18.3% return on equity. With the U.S. economy on a rebound and public construction benefiting from the loose fiscal policy, this company is likely to benefit in the near term. However, it is primarily a long-term play, which offers a good potential for both value and growth investors.