It’s amazing what a couple of good trading days can do for a lousy stock market.
When I thought about doing an article about stocks to buy hitting 52-week lows recently, a quick search of companies with a market cap of $2 billion or more revealed a total of 124 hitting 52-week lows.
Fast forward three days later and there’s only 22 stocks hitting 52-week lows according to Finviz.com.
Now, I’m as game as the next person when it comes to picking possible stocks to buy, but given I’m attempting to choose one stock from seven different sectors, 22’s not going to cut it.
Therefore, to ensure I’ve got better options from as many sectors as possible, I’ve relaxed the qualifier to those companies trading within 5% of a stock’s 52-week low. By doing so, I get a total of 120 stocks with a least one choice from eight different sectors, making the options a lot more palatable.
As I write this, Methanex (NASDAQ:MEOH) is trading within seven cents of its 52-week low of $41.39, which is more than half its 52-week high of $83.23.
Methanex is one of the world’s largest producers of methanol which its customers to use to make everything from adhesives to windshield washer fluid. It also sells methanol to oil refiners who turn it into a high-octane fuel.
Based in Vancouver, B.C., the company expects strong demand for methanol over the next four years with a growing piece of its business going to companies converting methanol to olefins which can then be turned into polyolefins, which are used to make all kinds of plastics.
In late April, Raymond James analyst Steve Hansen suggested to clients that they consider Methanex stock because of its steep decline in price. Hansen’s got an $80 price target and an outperform rating on it.
“We continue to recommend that investors accumulate MEOH shares based upon our constructive view on improving methanol fundamentals, the company’s robust associated free cash flow profile, and the stock’s attractive valuation,” Hansen stated.
Trading at a level it hasn’t seen since June 2017, if the economy holds, MEOH is a bargain.
Wolverine World Wide (WWW)
Source: Brubastos via Flickr (modified)
Wolverine World Wide (NYSE:WWW) is trading within 38 cents of its 52-week low of $27.64, which is 31% below its 52-week high of $39.77.
Wolverine, known for footwear brands such as Keds, Hush Puppies, Skechers, Sperry, and many more, is having a tough time dealing with tariffs on the Chinese shoes it imports. It recently asked the Trump government to reconsider increasing these tariffs as it would mean American households would be paying as much as a 100% duty on shoes imported from China.
“While U.S. tariffs on all consumer goods average just 1.9 percent, they average 11.3 percent for footwear and reach rates as high as 67.5 percent. Adding a 25 percent tax increase on top of these tariffs would mean some working American families could pay a nearly 100 percent duty on their shoes,” the letter stated.
While the near term doesn’t look good for the Michigan company, it still anticipates revenue growth in the low-to-mid-single digits in 2019. Despite all the tariff troubles, it estimates adjusted earnings per share will be at least $2.20, which means it is currently trading at less than 13 times its forward earnings. By comparison, Nike (NYSE:NKE) trades at almost 27 times its forward earnings.
Simon Property Group (SPG)
Source: m01229 via Flickr (Modified)
Simon Property Group (NYSE:SPG) is trading within 2% of its 52-week low of $159.69, which is 17% below its 52-week high of $191.41.
Recently, a group by the name of Peer & Peri LLC made a mini-tender offer to purchase up to 20,000 of the mall owner’s shares at a 21% discount to the $178.11 share price at the commencement of the offer on May 6. Down 8% since the offer was disclosed, it expired on June 6 at 5 p.m.
Although Simon put out a statement recommending shareholders reject the below-market mini-tender offer, these things are intended to catch investors off guard, prompting them to mistakenly sell their shares at a discount. If you Google “Peer & Peri LLC,” you will see that it happens to a lot of reputable companies.
I’m not sure why it’s allowed to happen, but it is.
Forbes contributor Sanford Stein, who’s spent four decades studying retail, recently made a great observation about Simon.
“David Simon knows this stuff. That’s why he is CEO of the largest mall developer in the country, with over 200 of the best remaining malls. It’s also quite likely that when the 1,300 or so malls that exist today are reduced to 500 or 600, in say the next decade, Simon Property Group will still own and manage the best ones,” Stein wrote May 14.
I like the idea of getting SPG stock at $140 a share, but I wouldn’t recommend you try to do it the Peer & Peri LLC way.
CVS Health (CVS)
Source: Mike Mozart via Flickr
CVS Health (NYSE:CVS) is trading within 5% of its 52-week low of $51.72, which is 37% below its 52-week high of $82.15.
CVS held its annual investor day June 4; a day in which CEO Larry Merlo spent most of his time assuring shareholders that its acquisition of Aetna would pay dividends in the long run despite the apparent near-term difficulties. Merlo sees the company generating double-digit sales growth in 2022 once the $70-billion purchase is fully integrated.
CVS is building a vertically integrated health business that provides everything from insurance, prescription drug benefits, healthcare services, and retail drugstores. It expects to find at least $300 million in synergies in 2019 and $800 million in 2020.
“Keep in mind we’re in the early innings of our transformational journey,” Merlo told investors. “This will be a multi-year journey with benefits building over time as we continue to build and refine new programs to better serve the needs of our stakeholders.”
I’m normally not a fan of large acquisitions, but given how incredibly dysfunctional the U.S. healthcare sector is, anything that reduces the cost while maintaining profitability, is bound to do well in the long run.
Take advantage of the uncertainty to get a well-run company at a very reasonable price.
Pentair (NYSE:PNR) is trading within 3% of its 52-week low of $34.72, which is 25% below its 52-week high of $46.00.
Pentair became a pure-play water company in April 2018 when it spun-off nVent Electric (NYSE:NVT), its electrical connection and solution company. As a result, Pentair now has three water-related businesses only: aquatic systems, filtration solutions, and flow technologies.
Given the importance of water in our world, the hiving off of its electrical business allows Pentair to focus entirely on water technology.
Although the company’s first-quarter core revenues were down 4% over the same time last year and its adjusted earnings per share fell 12%, it still expects to report adjusted EPS of at least $2.30 in 2019, which means it’s currently trading at less than 11 times its 2019 earnings.
Furthermore, with three operating segments generating almost identical revenues, it’s got downside protection built right into its business model. Should a recession come to pass, it won’t be overly reliant on a single segment for sales.
It’s not a sexy business, but it’s got an excellent 2.9% dividend yield to get paid until its growth initiatives take hold.
Urban Outfitters (URBN)
Urban Outfitters (NASDAQ:URBN) is trading within 4% of its 52-week low of $22.19, which is 58% below its 52-week high of $52.50.
Urban Outfitters has several issues that have brought its stock to its news in the past year.
They include deteriorating business trends, difficult same-store sales comparisons, product issues at its Urban Outfitters brand, including a slowdown in women’s apparel, and finally, a serious concern about tariffs on Chinese imports.
That said, it continues to be one of the most financially sound retailers that’s publicly traded. It finished the first quarter (April 30 quarter end) with no debt, $520 million in cash, and $447 million in free cash flow.
Free cash flow yield is one of the metrics I use for non-financials to evaluate the relative value of a stock. In the case of URBN, it has an FCF yield of 23% based on an enterprise value of $1.94 billion.
As long as it continues to deliver positive same-store sales growth, $23 ought to appear very cheap to investors.
Citrix Systems (NASDAQ:CTXS) is trading within 3% of its 52-week low of $93.12, which is 20% below its 52-week high of $116.82.
Citrix, known for its on-premise software for making companies more productive, is moving to the cloud and subscription-based software offerings. The transformation is aimed at creating a platform that provides large enterprises with a hybrid cloud that can grow and adapt based on their needs.
Change is always tricky, and while the transformation is expected to take several years, CEO David Henshall insists that it’s the right thing to do for customers, employees, and shareholders.
Citrix’s Intelligent Workspace is a platform for company applications that operate intelligently to improve productivity. The company’s goal is to provide enough productivity improvements through its platform to give users back one day of their work week lost to moving between applications.
If you look at its revenues for the first quarter ended March 31, you’ll see that Citrix’s subscription revenues increased by 37% over a year earlier accounting for 19.7% of its overall revenue, 490 basis points higher than a year earlier.
As it invests in research and development for the Intelligent Workspace, its subscription revenues will continue to grow at a double-digit pace.
Down from its all-time high of $116.82, if it drops below $90, you’re getting a terrific deal.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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