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TheStreet Open House

Three Stocks With High Recovery Potential

Stocks in this article: TECUA IDTI BSX

At the current level, the stock is simply cheap. The shares trade for less than one-third of tangible book value and have an enterprise-value-to-EBITDA of just 3. The company is extremely sensitive to economic conditions, but I believe this is priced into the stock. When the economy does recover, this stock should be a market leader.

Integrated Device Technology (IDTI - Get Report) is still on the list as well. The semiconductor company has also had a tough year and recently reduced its forward guidance. As a result of what the company described as deteriorating order conditions, revenue forecasts for the quarter were dropped by a range of 15% to 18%, and earnings estimates were cut as well.

Integrated Devices is well positioned to withstand the downturn. It has over $300 million in cash and no debt on the balance sheet. Although profits may be slipping, the company is still profitable, unlike many other technology companies this year. The company has a strong global presence, with over 70% of revenue coming from outside the U.S. Integrated Devices will be able to put its cash to work in the current weak stock market in the form of either acquisitions or stock buybacks. The flexibility of a strong balance sheet should allow the company to be a leader in the eventual recovery.

Medical device manufacturer Boston Scientific (BSX - Get Report) made the list as well. This one comes with two huge caveats. First, it is near the upper range of my debt limitations for an individual corporation. The second is that because of acquisitions over the years, tangible book value is actually negative.

So why include it? First, the company has $1.7 billion of cash on hand and is still profitable. It has also announced the sale of non-strategic assets to pay down debt over the next year. The other reason to look at the stock is that one of the most successful investors of the current bear market, John Paulson, is a large shareholder. So is value investing legend Charles Brandes. That, combined with the high Piotroski score, makes the stock worth a look.

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