The list of stocks hitting new lows on Monday is way longer than the list of new 52-week highs. This follows a heavy two-day sell-off of the US S&P 500 Index (Index:^GSPC). Scrolling the list, one company caught my attention- Coca-Cola Amatil Ltd (ASX: CCL).
To date, this year has been a shocker for the bottler and distributor of the world's most famous soft drink in Australia and five other countries. At these low prices, it may be offering a buying opportunity, but first we should see why it deserves to be on this list in the first place.
Falling earnings and business restructure
The first half of FY 2014 has seen product price competition in Australian retail stores and rapid currency depreciation affecting its Indonesian bottling business to pull interim earnings down about 15%.
The stock briefly touched $8.19 a share on Monday, which is 46% down from its May 2013 high of $15.14. The company will be announcing shortly how it will proceed with its business restructuring. Cost cuts could be made, but the Indonesian bottling business may require further heavy investment. In the short-term, that can impact net profits. I myself would like to know how the company proposes to turn things around to better understand its prospects.
Further slips in earnings are possible even though the company said the second half should be stronger. Investors may at least be happy to see the low share price has increased its dividend yield to 5.8% partially franked.
"Be greedy when others are fearful…"
For value investors looking for a contrarian buy, this could be the time as Warren Buffett might say to be greedy when others are fearful and buy distressed stock. Still, we don't have a clear bottom, so I would give a word of caution until the company fully outlines its restructuring.
Potentially lower entry prices may come, so keep Coca-Cola Amatil at the top of your potential "buy" list and you might be able to lock in a bigger return over the long term.
Although this stock may be an attractive opportunity, one much better choice could be a sexy ASX tech company that our analysts have identified and written a report on to reveal what this stock has to offer.
The Motley Fool has just released this brand-new free report on its top pick for 2015. Be among the first to get the name and code right now. Simply click here for your FREE copy… BEFORE the investing crowd gets wind of this!
