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On the first trading day of February the US DJIA (Dow Jones Industrial Average) closed at 26,186, down slightly from the all-time high of 26,610 reached on 26 January.  Within a week, the most followed index in the world had fallen to 23,860, dragging market indices around the world down with it.  From the US CNBC financial website, the following chart shows the plunge.

In reaction to severe market declines some investors head for the exits while others head for the inevitable bargains such carnage leaves behind.  Global leader in blood plasma, CSL Limited (CSL), has been one of the top stocks on the ASX for a decade.  Although its lofty valuation keeps some investors on the sidelines, those looking for a more reasonable point of entry had their chance with the recent declines.  Here is how the ASX and CSL responded to the drop in the DJIA.

Global markets recovered following the 10% correction in the DJIA and solid performers like CSL never missed a beat, vaulting to a new 52 week high.  Intrepid investors who jumped into CSL quickly have already reaped some rewards.
Other worthy stocks recovered as well but still qualify as potential bargains.  Stocks reaching new 52-week lows following a substantial market dip are a good a source for developing a shopping list, if the comeback potential is there.
The argument against bargain hunting off a 52-week low list is the “falling knife” maxim.  The idea is the stock fell for a reason and could keep falling.  The notion the market acts rationally is subject to debate.  Believers in irrational market sentiment in both directions begin by checking the performance history of the falling stocks.  History, we are told, is not a guarantee of future performance, which is true.  However, the great-value investors of all-time look for solid historical indicators before investing.  Analyst forecasts and recommendations lack 100% certainty, but investors looking for certainty should rely on fixed-income investments.
The following table includes price performance and valuation ratios for four ASX stocks that hit the 52 Week Low list on 12 February, in alphabetical order.  The top three stocks trade from to two to three million shares per day, while the smallest by market cap trades around 500k per day.  Trading volume is an indicator of investor interest.  

The Price to Earnings Ratio is the most widely used measure of valuation, although far from perfect.  A P/E of 15 represents an arbitrary dividing point between higher priced stocks whose price is justified by their higher growth potential and lower priced stocks where their true value is not perceived by the market as a whole, representing a potential bargain.
The Price to Earnings Growth Ratio adds earning growth, increasing the bargain potential of stocks with P/EGs under 1.0.  Both ratios should be considered in comparison with the average of the sector in which they operate.  However, that can be misleading in some cases.  As an example, packaging supply company Amcor Limited (AMC) is in the Materials sector, which includes ASX miners, hardly comparable businesses.
Based on those two ratios, Paragon Care (PGC) and AGL Energy (AGL) seem the most favorable targets, operating in sectors with similar businesses – utilities and healthcare equipment and supplies.  Performance history and forward-looking metrics favor these two companies as well.

AGL was slipping before the 12th of February following a note from Citi downgrading the stock to a SELL rating, reportedly due to a 4% decline in customers in Queensland.  However, the analyst consensus rating remains a HOLD, with two 2 analysts at BUY, 3 at OUTPERFORM, 2 at HOLD, 2 at UNDERPERFORM and 1 at SELL. 
For FY 2017 AGL reported earnings of $0.805 per share.  For FY 2018 analysts expect EPS of $1.52, followed by a forecast of $1.80 for FY 2019.  The company reported stellar Half Year Results with a 27% increase in underlying profit.  However, the high electricity prices spurring the increase are attracting government scrutiny, concerned over rising utility costs.  Nevertheless, AGL management remains confident Full Year profit will increase 26%, although the failure to raise its forecast disappointed investors.  The company raised Half Year dividend payments to $0.54, up from $0.41 a year ago. 
AGL has a proud history, dating back to 1837.  The company generates electricity from a variety of sources, with four coal-fired stations; two gas-generated stations; three hydro powered plants; six wind farms; and one solar powered generating station. The company serves both residential and business customers.
Paragon Care (PGC) supplies hospitals, medical centres and aged care facilities with medical equipment, including durables and consumables.  The company has made multiple acquisitions over the years.  One year ago, Paragon had five operating companies serving Australia and New Zealand:
• AxisHealth• Iona Medical• Volker Australia• Rapini and • GM Medical. 
The company has added an astonishing eight new operating companies, with a successful capital raise for funding. New acquisitions include:
• Electro Medical Group, • Midas Software Solutions, • Western Biomedical, Designs For Vision• Meditron• Insight Surgical• Medtech Solutions, and • Seqirus ImmunoHaematology.
Paragon’s Full Year 2017 Results showed a 25% revenue increase along with a 35% rise in net profit; but the company stumbled in the first half of FY 2018, with a 4% decline in revenue and a 24% drop in profit.  Management attributed the decline to seasonality and remained confident in its full year forecast.
Although investors were enthused by mid-year acquisitions, the accelerating pace along with the attendant costs appear to have spooked the crowd a bit, not to mention a change in leadership.  The company remains confident in the long-term strategy of increased revenue from existing customers utilising the expanded offerings, without additional sales and marketing costs associated with attracting new customers.

Infigen Energy (IFN) owns and operates electricity generating stations powered by renewable energy.  Currently the company has six wind-powered sites and an energy storage site in operation.  Infigen is adding six wind sites and eight solar-powered sites. The first of the new wind farms is scheduled to go into operation in August of 2018.
The company reached profitability in FY 2016, reporting net profit of $5.6 million, which rose to $32.4 million in FY 2017, a 478% increase.  Revenues also were up, from $172.5 million in FY 2016 to $195.8 million in FY 2017.
The company’s plans to expand operations in New South Wales and enter the market in Queensland and Victoria. The share price took off in 2016 in anticipation of rising demand for renewable energy but started to decline as the country’s Clean Energy Target came under fire. 

Global packaging powerhouse Amcor Limited (AMC) operates in Australasia, North America, Latin America, Europe and Asia.   The company offers a variety of packaging solutions for food, beverages, healthcare, personal and industrial applications.  Packaging includes rigid and flexible plastics, with 68% of revenues coming from the flexible products division. 
Domestic revenues are dwarfed by Amcor’s penetration in Europe, North America, and Emerging Market countries.

While providing packaging for goods with high turnover has been historically rewarding for Amcor, the company warned of “difficult market conditions” back in November.  However, management did not lower guidance.  Half Year Results were mediocre at best, with investors and some analysts becoming increasingly concerned about the underperformance of the company’s rigid plastics division.
During the recent release of Half Year Results management once again cited industry challenges from rising cost of raw materials, lowering volumes from rigid plastics, and “mixed conditions” in emerging markets.
Amcor is fully exposed to the global economy and benefits from a weakened Aussie dollar.  Emerging market economies are more volatile than the more established economies of Western Europe, Canada, and the US and as such pose both a benefit and a risk to Amcor.

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