Two Truly Undervalued Stocks That You Should Consider Buying Now

NEW YORK (Real Money) -- Investing in undervalued securities can be painful for many investors. They incorrectly assess undervaluation and as a result end up trying to catch falling knives. Indeed, while price paid is the determinant of value received, buying securities in an undisciplined fashion because the price is low can lead to a painful outcome unless you are willing to invest in a very wide basket of stocks.

However, I believe I have found a couple of names that look quite intriguing for the investor seeking undervalued opportunities. The first is small-cap Sizmek (SZMK) , a highly advanced provider of advertising and media solutions across online channels. When the company announced that third-quarter sales would be 7% below estimates, the stock price declined by nearly 30%. Sizmek has the ability to serve advertisers globally on several platforms, but it can also leverage its data to maximize their clients' targeting.

Sizmek is one of three providers of end-to-end solutions in digital advertising. The other two are Conversant (CNVR) and Google's (GOOGL) DoubleClick. Conversant is being acquired by by Alliance Data Systems (ADS) at a price that is 10 times was Conversant earned before interest, taxes, depreciation and amortization. Sizmek currently has market capitalization of $170 million, more than $90 million in cash and no debt. On an enterprise-value basis, the company trades for less than five times its EBITDA.

The other interesting opportunity is large-cap mobile communications provider Sprint (S) . Although the sector of mobile telecommunications is currently being "dominated" by the big two -- AT&T (T) and Verizon (T) -- Sprint today has all the bad stuff baked in. The company has a new CEO, who is refreshingly honest not only about the opportunity that lays ahead for Sprint, but about the time needed to get there. CEO Marcelo Claure, prior to joining Sprint, spent 20 years building cell phone distributor Brightstar from zero to $11 billion in revenue.

According to Claure, "If investors are looking for a rapid turnaround, this is not the case . . . [Sprint] was at the worst place it's ever been when I came in."

The company has some intriguing assets, including the biggest spectrum position of all the major providers, but that spectrum requires infrastructure. Another interesting point is that Sprint has about one-third the number of subscribers held by AT&T and Verizon but has market enterprise value of $45 billion compared with $250 billion for AT&T and $312 billion for Verizon. Indeed, Sprint is losing money while the other two are profitable. That is precisely what creates the opportunity, but it will take time.

Patience is a dear friend of the value-creating business. Both these names appear to have the right ingredients to create value over time.

At the time of publication, Gad had no positions in any of the securities mentioned, although positions may change at any time.

Editors note: This article was originally published on Real Money on Nov. 10 at 2 p.m. EST.

Sham Gad is the managing partner of Gad Capital Management, a value-focused investment firm based in Athens, Ga. Gad has written extensively for The Motley Fool and was a securities analyst for UAS Asset Management, a small value investment fund in New York City, in 2007. From 2002-2005, Gad managed assets for the Gad Investment Group.

Additionally, Gad has just released a new book, The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett. He earned his BBA and MBA at the University of Georgia. Gad appreciates your feedback; click here to send him an email.

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