The stock market has been on a major winning streak over the past quarter. With the Federal Reserve possibly starting interest rate cuts in 2024, investors are bidding up equities across the board. Several major stock indexes have reached new record highs and excitement is in the air.
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These sorts of cheerful conditions can cause investors to overpay for stocks. Thankfully, there are still some great bargains out there heading into February 2024. All five of these names dropped 10% or more over the past month, making them relative bargains in an otherwise frothy market. Here are five of the best stocks to buy now at fire sale prices:
— 3M Co. (ticker: MMM)
— Rockwell Automation Inc. (ROK)
— Yum China Holdings Inc. (YUMC)
— Unity Software Inc. (U)
— Intel Corp. (INTC)
3M Co. (MMM)
3M is a massive industrial conglomerate. Its products run the gamut from auto body repair to adhesives, power distribution, industrial abrasives, dental equipment and countless other categories. 3M has long relied on its research and development and constant product innovation to drive organic growth.
In recent years, however, 3M has gotten tripped up. Between a series of product liability lawsuits and stagnation in several parts of the core business, it has been a decade to forget for 3M investors. However, the company is now engaged in a credible turnaround plan that should unlock considerable shareholder value going forward. Shares go for around 10 times forward earnings and offer a greater than 6% dividend yield today. The company sold off following its most recent earnings report, and that gives investors an opportunity. While 2024 may be a soft year for 3M given the current economic headwinds, the future should be bright as the company’s turnaround gains momentum.
Rockwell Automation Inc. (ROK)
Rockwell Automation is an industrial company focused on helping firms bolster their automation capabilities. It runs across three categories: intelligent devices, software and control, and lifecycle services. Most competitors are strong in one or two of these categories. Where Rockwell stands out is that it offers the most complete automation ecosystem that can incorporate all three of these functions into an integrated package.
Rockwell shares recently sold off sharply on a disappointing earnings report. The firm serves clients in the automotive and chemicals industries, which are currently in a weak part of their cycles. The Federal Reserve’s interest rate increases have curtailed demand in areas of the economy such as consumer discretionary, leading to cutbacks in corporate capital expenditure programs. However, automation remains a strong long-term theme, and that should be doubly true given the surge in labor costs over the past few years. Rockwell Automation often sells at a fairly high price-to-earnings ratio, but after the recent sell-off, shares now go for a reasonable 20 times forward earnings.
[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]
Yum China Holdings Inc. (YUMC)
Yum China is the Chinese division of multinational fast food company Yum Brands Inc. (YUM
). The Chinese subsidiary operates KFC, Taco Bell and Pizza Hut, along with some other brands that are local to the Chinese market. Yum China also runs an e-commerce platform that sells prepared food in addition to home and kitchen accessories. The company is a massive operation within China, as it currently has about 400,000 employees. The KFC brand, in particular, has had resounding success within the Chinese market.
However, the Chinese economy has stagnated since the onset of COVID-19. Between a softening export market, weak consumer sentiment and a struggling real estate sector, China is not awash with disposable income right now. All sorts of multinational companies have reported slowing sales out of the region over the past year, and, unsurprisingly, investors have dumped restaurant stocks as well. To that point, YUMC stock is down more than 40% over the past year. That leads to a solid entry point with shares now at 17 times forward earnings for this traditionally fast-growing consumer company.
Unity Software Inc. (U)
Unity Software runs a leading graphics engine primarily used for powering video games. The company has approximately 70% market share for powering mobile games, and it has a significant, though smaller, position in other platforms including PC, console, and virtual and augmented reality.
Unity ran into problems from overexpansion. The gaming industry boomed during the pandemic when people were stuck at home and looking for new entertainment options. As the economy reopened, gaming growth slowed. 2023 was a record year for layoffs across the gaming industry, and Unity slashed its employee base as part of this industry rightsizing. Between the layoffs and some questions around Unity’s revenue model, U stock has suffered. But the firm’s cost-cutting should help it reach robust profitability in 2024. Meanwhile, Unity is helping build apps for Apple Inc.’s (AAPL) new Vision Pro augmented reality system. If spatial computing takes off with Apple’s help, that should be a huge growth lever for Unity going forward.
Intel Corp. (INTC)
Intel is one of the world’s leading semiconductor companies. The chip giant spends about $16 billion annually in research and development, and this massive investment has yielded Intel numerous technological breakthroughs and market-leading chip designs. In recent years, however, Intel has lost ground to rivals such as Advanced Micro Devices Inc. (AMD) and Nvidia Corp. (NVDA).
Intel spun off its automotive technology division, Mobileye Global Inc. (MBLY), in 2022, but it retains a majority stake in that firm. Mobileye stock recently plunged following weak earnings as the auto market continues to lose steam. That, combined with weakness in Intel’s core markets, has led to a recent correction in the share price.
In the bigger picture, Intel is investing heavily in new capacity, aided by the Biden administration’s CHIPS and Science Act which provides support to the domestic semiconductor industry. Intel is also building out its foundry business, which could attract substantial interest from other semiconductor firms looking to diversify their vendors and supply chains.
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5 of the Best Stocks to Buy Now originally appeared on usnews.com
Update 02/02/24: This story was previously published at an earlier date and has been updated with new information.
