Just as we examine companies each week that may be rising past their fair value, we can also find companies potentially trading at bargain prices. While many investors would rather have nothing to do with companies tipping the scales at 52-week lows, I think it makes a lot of sense to determine whether the market has overreacted to the downside, just as we often do when the market reacts to the upside.

Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.

You can't kill a zombie
You can't fall in love with a stock, but you also can't allow yourself to hate a company forever, either. I've been a staunch pessimist on Advanced Micro Devices (NYS: AMD) forever. I honestly can't recall one time in my 14 years of investing that I thought even halfway nicely about AMD -- but that all changes today.


As my Foolish colleague Anders Bylund opined last week, he feels AMD is a zombie stock that's headed to zero. I can 100% understand his point of view, but I'm going to humbly disagree and mark this as the beginning of the long-term AMD turnaround story.

For one, AMD is finally going to address its costs through layoffs and other operating efficiency improvements, which should hopefully help to normalize its highly cyclical expense structure. While I do worry about whether or not AMD will be able to bring new products to market, I feel the cost savings are a necessary evil to turning AMD's business around. There's also a good chance that at a market value of just $1.56 billion, either a public or private firm would undoubtedly take interest in the company.

As Anders stated, the microprocessor war has definitely been won by Intel (NAS: INTC) , but I think this was a forgone conclusion from the start. If AMD focuses on emerging market growth and tablets, while removing some of its reliance on notebooks, it could easily be back on its feet in no time.

Lasers, photonics, and optics, oh my!
It definitely hasn't been a year to remember for photonic technology and optical components supplier Newport (NAS: NEWP) , which has been crushed by a weakening global economy, worries about government funding, and increased competition from IPG Photonics (NAS: IPGP) , whose laser products have taken the sector by storm. Still, plenty of positives exist that could make Newport a company to watch moving forward.

Newport has done a very good job reining in costs in anticipation of a government funding cutback and has utilized its efficiencies to boost its cash flow and begin paying down its debt. Between 2004 and 2009, Newport generated between $2 million and $26 million in positive cash flow, according to Morningstar. That changed over the past two years, with Newport recording $62 million and $55 million in positive free cash flow in 2010 and 2011.

With improved margins and considerably better cash flow, there's reason to believe that when the next cyclical downturn strikes, Newport may be able to remain profitable. Specifically, I would look for strength in the health and life sciences division to drive growth over the coming years as research and development technologies become cheaper for biotechnology companies. At just nine times forward earnings I consider Newport a steal at these levels.

Casting a spell
This is the week of letting bygones be bygones, and it's only befitting that I end it by reversing an underperform call to an outperform call on Activision Blizzard (NAS: ATVI) .

About a year ago I correctly predicted that the maker of World of Warcraft was trading at a pricey valuation relative to its peers and looked vulnerable given a rapid dropoff in video game sales. One year later, much of the sector is still struggling to find its footing, with research and development costs soaring and console sales stagnant at best. Activision, however, has been vigorously moving its efforts online, which is being reflected in noticeable margin expansion and a healthy cash balance.

Activision has improved its gross margins in each year since 2008, from 39.2% to 63.1% in 2011 through prudent fiscal management, and a focus on digitizing content (which has considerably higher margins and fewer associated costs). It hasn't been all fun and games, with Activision announcing 600 layoffs earlier this year, but its focus on online content should help diversify the company solely away from console sales, assuming it can keep churning out premium titles. At just 10 times next year's earnings, and with the prospect of higher dividends potentially on the horizon, it's worth a shot here.

Foolish roundup
This week we once again rounded up more values in the tech sector. All three companies share a penchant for cost-cutting and aren't willing to sit on their laurels while their peers pass them by. This week is a true case of buying when everyone is fearful.

I'm so confident that these three names will bounce off their lows that I'm going to make a CAPScall of outperform on each one.

With AMD effectively out of the way, can anything stand in Intel's way? Find out by getting your copy of our latest premium research report on Intel. Packed with in-depth and unbiased analysis on the opportunities and threats facing AMD -- and complete with a year of regular updates -- this report will give you the tools needed to make smart long-term decisions. Click here to get your copy.

The article 3 Stocks Near 52-Week Lows Worth Buying originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Intel and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Intel, IPG Photonics, and Activision Blizzard, as well as writing puts on Intel and creating a synthetic long position on Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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hereisbam

I would be careful about recommending Activision-Blizzard too highly without looking at underlying game changes that accompanied the new Mists of Pandaria (MoP) expansion for World of Warcraft.. MoP is generally receiving positive reviews but the expansion also included a drastic change to all previous content with a feature called Cross-Realm Zoning. This feature was promoted as a seamless way to get more players to interact out in parts of the virtual world were often empty. Sounds good right? But it basically did so by hardware/software tricks to cram all prior elements of the game into smaller buggy environments. In the gaming industry World of Warcraft has been a symbol of quality that you pay a premium to play. Now the game subscribers have been paying for the last seven-plus years have been converted overnight from upscale neighborhoods to crowded tenement housing overrun with roaches (bugs). . Many players have paid substantial amounts of money for character migrations to play in a "community" with a certain population and a certain time zone. Those choices were largely negated in one day. The engine that supports Activision-Blizzard's cash flow is still the subscription money rolling in from WoW. This change could lead to a significant drop in subscriber numbers if player feedback is an indicator.. As a followup to the Diablo 3 launch which alienated a substantial portion of a long-term fan base this is another indicator Blizzard has lost touch with priorities that made it a juggernaut in the first place, game quality above all else.

For more background please refer to the player feedback on the WoW General forums. To date there have been seven capped forum threads, with more than 1300 pages, and 26,000 submissions. The reception is overwhelmingly negative. Blizzard's response has been nearly non-existent.
1st Cross Realm Zoning (CRZ) feedback thread (US): http://us.battle.net/wow/en/forum/topic/6521292325
Latest CRZ (#8) feedback thread (US): http://us.battle.net/wow/en/forum/topic/6934185527?page=1

There is a similar response from players in Europe. Two major CRZ threads now appear on the 1st page of the EU General Forums.
http://eu.battle.net/wow/en/forum/topic/5435043557
http://eu.battle.net/wow/en/forum/topic/5643614577

October 24 2012 at 11:33 AM Report abuse rate up rate down Reply