Seven stocks to watch near a 52-week low.
The U.S. stock market plummeted earlier this year before recovering its losses and pushing on to even bigger gains. Yet not every company recovered along with the wider market, and some good stocks were left behind near their lowest price points of the year. Stocks that trade near their 52-week lows are often dismissed as bad investments, but the fact that they’re trading on the cheap isn’t a good reason to ignore them — in fact, smart investors who pay close attention to these companies can find some diamonds in the rough. This is especially true these days when geopolitical and pandemic-related problems weigh down companies that should otherwise be performing quite well. Here are seven stocks to buy while they’re trading near their 52-week lows.
Revlon (ticker: REV)
The global pandemic has led to unintended consequences for cosmetics company Revlon — after all, consumers locked up indoors for the last five months have fewer face-to-face interactions, and therefore no reason to spend money on makeup. Revlon noted in its first-quarter earnings report that sales dropped 18.1% in the three months ending in March, but if the impacts of the virus were excluded from results, then sales would’ve only fallen 6.5%. It didn’t help that the company is undergoing its Revlon 2020 Restructuring Program, which contributed to a whopping $186.2 million operating loss this quarter. But the restructuring will lead to cost reductions in the future, while in the near term, Revlon’s e-commerce sales skyrocketed 47% — a combination that indicates Revlon won’t be hovering near its 52-week low forever.
With unemployment through the roof as increased government assistance winds down, it looks likely that many American citizens may soon be strapped for cash. Enter FirstCash, operator of more than 2,700 pawnshops in the U.S. and Latin America — a business well-positioned to profit from these unprecedented times. Unfortunately, FirstCash wasn’t able to benefit from economic uncertainty this past quarter — a combination of “sharply reduced personal spending patterns, rent and utility forbearance programs, government stimulus payments and enhanced unemployment benefits” led to a 7.5% decrease in revenue and an 18% decline in earnings per share. But the company enjoyed impressive cash flow, paid off a substantial portion of its debt and opened 24 new locations in the last quarter as it prepares to reap the rewards of a slow economic recovery.
Pilgrim’s Pride (PPC)
For the last few months, meat producer Pilgrim’s Pride has struggled against extreme pressure to keep up production, a precipitous drop in demand as restaurants closed their doors and higher labor costs amid outbreaks in meatpacking plants. The result was that EPS declined 102.9% in the second quarter to a loss of 2 cents per share as Pilgrim’s Pride struggled to keep costs in line. The cherry on top came in June when its CEO was indicted on charges of price fixing with competitors — shares dropped by more than 12% the day the charges were announced. Still, there’s some hope on the horizon, and the company reported that by June performance had improved as states reopened. Despite all of its difficulties, Pilgrim’s Pride still accounts for about 17% of the poultry industry, and as food service recovers across the country, Pilgrim’s will recover as well.
There’s no denying that clothing retailers are in dire straits — as consumers stay home, the number of retailer bankruptcies continues to mount, and those that can’t keep their costs and debt under control are doomed to go the way of Ascena Retail. While shares of Express have fallen about 80% year to date and are flirting with 52-week lows, the company has been aggressively cutting costs and reducing inventory for the last few months as it shores up its accounts. The results speak for themselves: In the second quarter, Express cut inventory receipts by $100 million, lowered expected annual capital expenditures by $25 million and identified cost savings to the tune of $75 million. Express is intent on surviving the pandemic through a winning combination of lower costs and no debt, and from all appearances, the company will accomplish its goal.
Maybe it’s wrong to pick on a company that went public less than a month ago for hovering around its 52-week low, but GoHealth hasn’t exactly sprinted out of the gate — then again, the company’s long-term potential has investors talking. GoHealth is an online health insurance platform that matches users with insurance and Medicare policies, and those Medicare policies are where GoHealth sees most of its profits coming from in the next few years. In its S-1 filing, the company cites the fact that with “over 10,000 Americans turning 65 years old every day,” Medicare enrollment is expected to “grow from approximately 61 million individuals in 2019 to approximately 77 million individuals by 2028.” Those are long-term tailwinds that GoHealth intends to ride all the way to the top, and investors may want to get in on the action early while shares are still priced so low.
Talk about bad timing: Back in February, HSBC announced a large-scale restructuring effort that would see the British banking giant cut 15% of its workforce, reduce assets to the tune of $100 billion, and shift its focus to the Middle East and Asia and away from underperforming markets in Europe and the U.S. Then the virus struck, and suddenly HSBC’s well-laid plans were disrupted by a global pandemic — not to mention ongoing tensions between the U.S. and China, as well as uncertainty around the future of Hong Kong, where HSBC makes more than half of its profits. HSBC has been caught in the middle of geopolitical uncertainty and an unprecedented pandemic, sending shares plummeting nearly 45% this year. That said, when these storm clouds recede, HSBC will still be standing, and investors who get in now will profit.
Canon, maker of printers, scanners and cameras the world over, is fresh off reporting its first quarterly loss in 19 years. During the second quarter, office closures and a worldwide decline in travel provided a one-two punch that pushed sales down by more than 25%, which in turn sent shares of Canon down toward 52-week lows. While Canon may be down, it’s far from out, and the worldwide leader in interchangeable-lens digital cameras is confident that as businesses around the world reopen, it will rebound, albeit slowly. Investing in Canon now means investing for the long haul; until people begin to come back to offices and travel restrictions ease, Canon will struggle. But a return to some semblance of normalcy should return the company to profitability, and investors may want to get in on the bottom floor.
Best 52-week-low stocks to buy:
— Revlon (REV)
— FirstCash (FCFS)
— Pilgrim’s Pride (PPC)
— Express (EXPR)
— GoHealth (GOCO)
— HSBC (HSBC)
— Canon (CAJ)
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Update 08/05/20: This article was published on a previous date and has been updated with new information.