Stocks are at a crossroads heading into autumn. After a vigorous rally in the first half of the year, the market has been more volatile over the past couple of months. As the Federal Reserve continues its monetary tightening agenda, investors continue to fret about things such as the housing market, weakening consumer spending and a potential recession on the horizon. That said, some investors remain optimistic about the potential for a so-called economic soft landing.
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Whether or not the Fed manages to keep the economy going on a favorable path, however, there are bargains to be had in the stock market today. The below five stocks fell sharply in August and could be set for significant recoveries during the remainder of the year. Here are five of the best stocks to buy now:
— Qualcomm Inc. (ticker: QCOM)
— Sony Group Corp. (SONY)
— Citigroup Inc. (C)
— Norfolk Southern Corp. (NSC)
— DexCom Inc. (DXCM)
Qualcomm Inc. (QCOM)
Qualcomm shares retreated in August following another round of underwhelming reports out of the semiconductor sector. Smartphone sales are down year over year and telecom spending is slowing down as well. All this reflects poorly on Qualcomm’s near-term outlook. At the heart of the matter, the initial 5G roll-out has been disappointing, and this has left a lot of potential 5G-linked revenues on the table for Qualcomm.
However, investors shouldn’t give up. For one thing, industry analysts expect 5G to gain steam as Internet of Things applications such as connected cars take off. This should drive far more industrial connections to the 5G network and increase overall demand. For another thing, Qualcomm has invested heavily in mobile connectivity, and is powering cutting-edge tech, such as artificial intelligence-enabled chips, for mobile devices. So for investors that can look past the current weakness in 5G and smartphone-related revenues, there’s a lot to like at Qualcomm. That includes the valuation, which is now less than 13 times forward earnings.
Sony Group Corp. (SONY)
Japanese media and technology giant Sony has seen its shares slip more than 15% from their recent highs. That might be surprising, given that Sony just raised its forward earnings guidance in August. Overall, the strong gaming and entertainment markets are more than making up for weakness in smartphones as it pertains to Sony’s results.
Regardless, traders have sold off Sony for a variety of reasons. The Hollywood writers’ strike will have negative consequences for Sony’s entertainment business. Microsoft Corp.’s (MSFT) takeover of Activision Blizzard Inc. (ATVI) threatens to consolidate the gaming industry and erode Sony’s relative position. Plus, the weaker consumer electronics market raises concerns going into the key holiday shopping season. That said, Sony’s own results have been strong despite these headwinds, and shares go for less than 17 times forward earnings after the recent correction.
[READ: 10 Best-Performing Stocks of the Past 30 Years]
Citigroup Inc. (C)
After appearing to turn the corner this spring, Citigroup has seen its momentum fade. In fact, shares slipped to near fresh 52-week-lows in August following a couple of negative developments. Higher capital requirements tied to potentially increasing credit risk may limit Citigroup’s ability to repurchase stock and increase its dividend for the time being. In addition, Citigroup’s long-awaited sale of its Banamex Mexico division was delayed again, leading to growing investor antipathy.
However, at some point, value becomes its own catalyst. And Citigroup has to be near that level. With shares at just seven times forward earnings and selling at less than half of tangible book value, Citigroup is in deep value territory. The 5% dividend yield is another strong incentive as well. Citigroup isn’t the most respected large American bank, but on the other hand, it appears to be the most compelling bargain of its peer group today.
Norfolk Southern Corp. (NSC)
Norfolk Southern has been the center of unwanted public attention. Some of that came following the train derailment in East Palestine, Ohio, which caused significant environmental disruption and negative scrutiny. The company also made potentially costly concessions to unions around safety measures and sick leave benefits.
More broadly, U.S. rail traffic has turned meaningfully negative year over year as industrial activity appears to be slowing after a boom in 2022. However, NSC stock already reflects these concerns and then some. Shares are trading back to pre-pandemic levels now after their continuing downtrend, and they sell for less than 17 times forward earnings. The dividend yield has crept up to 2.6% as well. That’s a fine price for investing in this vital piece of the North American railroad grid.
DexCom Inc. (DXCM)
DexCom was one of the biggest losers on the market in August. DXCM stock hit a peak of $139 in July, but tumbled to just over $100 per share by the end of August. DexCom designs and sells continuous glucose monitoring (CGM) systems primarily used in the management of diabetes. Shares plunged seemingly amid an increasing amount of media attention toward prescription drugs which can fight obesity, such as Ozempic.
In theory, mass usage of Ozempic could greatly lower the diabetes rate, and thus the need for DexCom’s CGM systems. In practice, this seems like a gross overreaction at this point, as there are both cost considerations and potential long-term side effects which could trip up the Ozempic weight loss trend. It’s a risk for DexCom shareholders to monitor, but there’s no need to panic yet. Meanwhile, despite the scary headlines, Dexcom has grown revenues from $1 billion in 2018 to an estimated $3.5 billion this year, with analysts forecasting another 20% top-line increase in 2024. That makes DXCM stock a top growth opportunity going forward.
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5 of the Best Stocks to Buy Now originally appeared on usnews.com
Update 09/01/23: This story was previously published at an earlier date and has been updated with new information.
