Stocks to watch near 52-week lows
Buying a stock in freefall is often compared with attempting to catch a falling knife: You may get hurt in the process. At the same time, an unrealistic fixation on buying and selling stocks at the perfect time can distract from more practical considerations, like simply buying shares of decent companies at attractive prices. While investors looking to limit risk might want to wait for a bounce in these names before buying in, more risk-tolerant investors looking to hit a home run can take inspiration from this list of stocks to watch near 52-week lows.
Vertex Pharmaceuticals (ticker: VRTX)
This $55 billion biotech stock is easily the largest company on this list. It’s also consistently profitable and trades for a reasonable valuation of around 21 times earnings, making it an interesting play. For a company expected to grow earnings per share by more than 19% annually for the next five years, that’s not a bad price. Vertex has a blockbuster drug in its cystic fibrosis treatment Trikafta, a triple-combination therapy, which hauled in $3.86 billion last year and should earn even more in 2021, given its somewhat recent approval in the U.S. and European Union, where the drug is known as Kaftrio. Markets have been punishing VRTX since it stopped the development of an experimental treatment for liver disease in October, but the company’s prospects are still quite bright.
Perrigo Co. (PRGO)
Perrigo is a generic drug maker, which means it has much lower margins than a company like Vertex Pharmaceuticals, which generally focuses on rare diseases. Still, that doesn’t mean Perrigo isn’t worthy of an investment; at today’s prices, the $6 billion drugmaker looks pretty attractive, trading for just 10 times forward earnings. The business reported record third-quarter net sales, and analysts expect slow but steady top- and bottom-line growth moving forward. Growing e-commerce sales of over-the-counter products like ulcer treatment Prevacid and topical arthritis pain gels. Shares pay a decent 2.1% dividend to boot, adding another reason PRGO is one of the best stocks to watch near 52-week lows.
Although e-commerce marketplace Poshmark is technically a stock near 52-week lows, the company only went public in mid-January, so it’s not as alarming as you might expect. Poshmark aims to bring a social aspect to e-commerce, offering sellers the ability to interact with customers on a more personal basis and using an algorithm to determine a feed of the most relevant products for a given user. Poshmark takes a tidy sum for the service it provides, charging sellers 20% of the final sales price for anything $15 and higher, and a $2.95 flat fee for sales less than $15. At about 20 times revenue, the market is expecting large growth from the $5 billion online retail stock.
Tootsie Roll Industries (TR)
Few companies have a more “old economy” vibe than Tootsie Roll Industries, the Chicago-based confectioner with roots going back to 1896. While investors might not be inclined to take this company seriously, that would be a mistake: The candymaker owns an impressive portfolio of brands (besides the eponymous Tootsie Roll brand), including Charms Blow Pop, Tootsie Pop, Junior Mints and Charleston Chew, among others. The $2.6 billion company is consistently profitable and pays a 1.1% dividend. TR stock was one of the handful of Reddit stocks that soared in late January as traders piled into heavily shorted names, and shares have since come back down to earth. Unlike GameStop Corp. (GME) and AMC Entertainment (AMC), however, Tootsie Roll has a solid underlying business.
Dun & Bradstreet Holdings (DNB)
Business data and analytics company Dun & Bradstreet is a $9.6 billion company trading at about 22 times forward earnings. Analysts expect earnings to grow by 15% annually over the next five years, an above-average level of growth. Analysts also expect solid revenue growth of more than 22% in 2021. Last quarter, DNB’s international business was the standout from a growth perspective, advancing by 9.9% year over year versus less than 1% growth in the North America segment. And, despite trading at 52-week lows, Dun & Bradstreet is a tried and tested business, with a history of providing risk management and business insights for its customers that dates back to 1841.
Hawaiian Electric Industries (HE)
When buying stocks at or near 52-week lows, protecting your downside is an important part of your investment decision. Enter Hawaiian Electric Industries, a $3.8 billion regulated electric utility that’s been serving the people of Hawaii since 1891. The utilities sector tends to be one of the lowest-volatility pockets of the market, given the stable demand, predictable cash flows and high barriers to entry for competitors. And HE stock is a healthy, profitable utility in its own right, trading at less than 18 times earnings and also paying a strong 3.8% dividend yield. In a unique twist, the company also operates its own banking business, which it has been running successfully since 1925.
Kellogg Co. (K)
Packaged foods is another defensive industry, especially when you’ve got a portfolio of strong brands like Kellogg does. Cheez-It, Pringles, Eggo, Pop-Tarts and Rice Krispies Treats all fall under the Kellogg umbrella. It’s not a growth business by any means, but it’s a stable and proven one, worth $20 billion. Kellogg also pays the highest dividend on this list at 3.9%. The company’s debt load is a bit high, with a debt-to-equity ratio of 2.8. Thankfully, Kellogg uses just 66% of its profits to pay its quarterly dividends, which is a typical payout level for many companies. The company expects demand to fall slightly in 2021 as consumers increasingly return to normal life.
Beaten-down stocks to watch in 2021:
— Vertex Pharmaceuticals (VRTX)
— Perrigo Co. (PRGO)
— Poshmark (POSH)
— Tootsie Roll Industries (TR)
— Dun & Bradstreet Holdings (DNB)
— Hawaiian Electric Industries (HE)
— Kellogg Co. (K)
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Update 02/11/21: This story was published at an earlier date and has been updated with new information.