Three shares I might buy right now

Dacia LoganAs the European debt crisis drags on, the outlook for the stock market has been dire -- and shares have fallen to their lowest valuations since 2009. But for the enterprising investor, now could be the perfect opportunity to find solid companies trading at a discount.

Amid the rubble, here are three stocks I am considering for my portfolio:
Renault (€32/€9.5bn market cap)
Renault SA is a French-based motor manufacturer that markets vehicles under the Renault, Dacia and Samsung Motors brands. It also has a business segment, RCI Banque, which provides car financing and other commercial services.

Renault's performance has been less than stellar during the past few years, with declining sales in Spain, Italy, France and the UK. Its shares have dropped to about €32 since trading at €67 in September 2009.

If you examine Renault's books carefully, however, you will find that there is more value on offer than just the core business. You see, Renault owns significant stakes in several companies: Nissan 43%, Volvo 7%, Daimler AG 1.6%, and AvtoVaz 25%. The total market value of these stakes is currently €16 billion. Meanwhile, RCI Banque, the profitable financing arm, has a book value of €2.6 billion and generated after-tax profits of €493 million last year. Renault's market cap is currently €9.5 billion, which is only 49% of the total value of all these assets.

Renault in itself has compelling numbers: a price-to-book (P/B) ratio of 0.36 and price-to-earnings (P/E) ratio of 4.3, with a dividend yield of 3.3%. Also, its core operations are showing positive signs. Despite declining European sales, total sales have increased by 26% since 2009 and have this year saw a 9% annual increase. Cash flow from operations has increased to €500 million, too, enabling the company to decrease net debt down to €229 million during the last three years.

Growth has been fuelled mainly by increased sales in international markets, which accounted for 43% of total revenues sales in 2011 compared to 37% in 2010. The company sees continued growth in emerging markets and is focusing its efforts on Russia, Brazil and India.

Alliance Pharma Ltd (23p/£55m market cap)
Alliance Pharma is an AIM-traded specialty pharmaceutical company that sells licensed and acquired pharmaceutical products.

Unlike most small-cap pharmas, which focus on developing new treatments, Alliance concentrates on acquiring out-of-patent products with stable sales in niche markets.

The logic here is that such products tend to enjoy prominent brand names and significant market positions that do not need a lot of ongoing support or attract much competition. The approach therefore allows Alliance to be highly profitable while minimising risk.

The company has a highly diversified portfolio, consisting of 50 products gained through 21 acquisitions in 14 years. For the past six years, acquisitions have averaged two a year and sales have grown at an average compound rate of 22% annually. Meanwhile, the average return on equity has been good at 17% and average operating margins have been high at 22%. There is a dividend, too, which has increased from 0.3p per share in 2009 to 0.75p per share in 2011.

Currently, Alliance is trading at 23p per share, just 7% higher than its 52-week low. The P/E is 6.7, which looks very low to me given the aforementioned track record. The company has £13m remaining in its revolving credit facility and has announced plans of more acquisitions, which could further boost earnings. Analysts forecast sales of £44-47m and earnings per share of 3.4-3.7p for the current year.

Rexam plc (427p/£3.7bn market cap)
Rexam is one of the largest packaging companies in the world. It makes cans for some of the world's most popular drinks groups, including Coca-Cola and PepsiCo.

Rexam is one of the three major players in a global packaging industry that boasts high barriers to entry. The firm is the largest drinks can manufacturer in Europe (market share 40%) and South America (60% market share in Brazil), and the second-largest in North America (market share 20%). It is also a major player in plastic packaging for healthcare and personal-care products.

Rexam is a durable, cash-generative company that paid above-average dividends for years. Due to an expensive acquisition in 2007, however, and the effects of the global financial crisis of 2008, Rexam suffered losses of £29m in 2009. It had to launch a rights issue to service debt and was forced to cut its dividend from 18.7p to 8p per share.

In the past two years, however, Rexam appears to have bounced back. Operations were streamlined to strengthen the balance sheet and reduce net debt from £1.4b from £2.7b in 2008. Rexam also plans to divest some parts of its plastics division and focus on their beverage-packaging business, which accounts for 80% of its revenues.The dividend was raised from 8p per share in 2009 to 14p per share in 2011, and the group has made good on the commitment to re-establish dividend cover in the 2.0-2.5 range. Return on capital employed increased from 5% in 2009 to 10% in 2011, while earnings have jumped from 11.4p in 2009 per share to 36.3p per share in 2011.

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