Time to Load Up? 3 Stocks Sinking to New 52-Week Lows
Going against the crowd isn’t easy. Buying stocks that others are selling en masse takes nerves of steel. After all, why would you want to buy a stock so many investors are selling? There must be something wrong with it, right?
Well, maybe. The wisdom of crowds isn’t infallible. Fear and greed are the primary factors that send investors running from a stock or to it. And when they see others reacting they either want to get out quick or jump on the bandwagon.
A company could just have a short-term problem that will soon clear up. That’s when you would want to rush in when others are running out. As Warren Buffett once noted, be fearful when others are greedy and greedy when others are fearful.
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These three stocks are hitting their 52-week lows. Let’s see whether you should be greedy or fearful with each.
Boeing (BA)
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The optics for Boeing (NYSE:BA) aren’t good. Following a hatch door popping off mid-flight on a Boeing 737 Max 9 aircraft, came a series of additional mishaps: A tire fell off the landing gear, an engine caught fire, an external panel fell off and there have been hydraulic system problems. All this occurred in the span of a few weeks.
While no passengers were hurt in any of the incidents, the drumbeat of bad PR did BA stock no favors. Shares that had been trading north of $267 plummeted below $180, a 33% decline and a loss of $53 billion in market valuation.
The Max 737 was grounded and the FAA ordered all production of the aircraft halted. Numerous instances where Boeing and parts supplier Spirit AeroSystems (NYSE:SPR) “failed to comply with manufacturing quality control requirements” were reported.
A third-party auditor will be reviewing manufacturing processes at the companies to ensure compliance. Equally troublesome is airlines like United Airlines (NASDAQ:UAL) are unsure whether they will take delivery of any more Max 737 planes. Other airlines are questioning Boeing’s safety record as well. The Justice Dept. also launched criminal inquiries.
It is much too early in this ongoing situation to say whether BA stock is done falling. Other major concerns may arise as the audits are conducted that reveal deeper problems or a culture of carelessness. Boeing’s stock may be down sharply, but I wouldn’t be boarding any time soon.
SolarEdge Technologies (SEDG)
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Residential solar inverter manufacturer SolarEdge Technologies (NASDAQ:SEDG) continues testing new lows as the cyclical solar energy industry cycles lower still. Inflation and high interest rates are conspiring against the No. 2 inverter maker because the higher cost of installing a new solar system is too expensive.
Fourth quarter earnings reported last month showed revenue plunging 56% year over year to $316 million. Solar segment sales were even worse, down 58% from last year. SEDG stock’s cost of making its inverters exceeded the revenue it took in causing gross margins to turn negative. Net losses exploded to $160 million.
While leading inverter manufacturer Enphase Energy (NASDAQ:ENPH) is also down, its stock is up well off its lows. Shares sit 50% above its low point though they remain just as far away from their highs. It indicates the dicey economic is hitting SolarEdge harder.
The February inflation numbers came in hotter than anyone expected showing the lingering effects excessive government spending is having on the economy. That has all but dashed hope the Federal Reserve will cut interest rates at its next meeting and a reduction might not happen till much later in the year.
However, residential solar installations could pick up again with a cut in interest rates and the government getting more serious about tackling inflation. The former has a better chance of happening than the latter, particularly in an election year, so there may still be time to buy in at lower levels.
Boston Beer (SAM)
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Shares of Boston Beer (NYSE:SAM) are down to almost $290 per share, 26% below recent highs and now at a level it hasn’t seen in two years. Disappointing fourth-quarter results sent the brewer’s stock careening lower and led president and CEO Dave Burwick to announce he was retiring and leaving the board of directors on Apr. 1.
It’s been a long time since the maker of Samuel Adams beer was an actual craft brewer. Over the years, particularly during the hard seltzer craze, the company actually produced greater amounts of other alcoholic beverages than beer. Truly hard seltzer was the biggest beverage but Twisted Tea was a popular seller, too.
Yet full-year depletions fell 6% in 2023 primarily due to declines in hard seltzer and Boston Beer’s beer portfolio. Depletions refer to shipments to distributors and retailers and are used by the industry as a proxy for consumer demand. Hard seltzer demand went from a growth rate of 158% in 2020 to a 21% decline last year.
The brewer also made an ill-advised purchase of Dogfish Head Brewing in 2019 for $300 million. Boston Beer began writing down the value of the brand in 2022, taking a non-cash impairment charge of $27.1 million. It wrote off another $15.8 million last year. Expect more writedowns to come.
With that said, the brewer is still the face of the craft beer industry. SAM stock is also not at an unreasonable valuation. Going for 23 times next year’s earnings, less than twice its sales and 17x free cash flow, buying Boston Beer now could see some heady returns going forward.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.
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