At any time, but in volatile markets particularly, investors who are seeking value can look for stocks that are trading near their 52-week lows. These stocks have a higher likelihood of being undevalued and oversold. Therefore, they can be savvy buys particularly in a range-bound market.
Of course, it’s important to perform your due diligence when considering buying stocks at 52-week lows. As the saying goes, sometimes stocks trade at a low price for a reason. In this article, we’re looking at three stocks that are trading near their 52-week lows and may be primed for a short-term rally for opportunistic investors.
Keurig Dr Pepper Holds its Own in a Competitive Sector
At a time when consumer discretionary spending is declining, beverage companies are reporting solid earnings. And the same can be said of Keurig Dr Pepper, Inc (NASDAQ: KDP). In the company’s most recent earnings report, Keurig Dr Pepper reported earnings per share of 34 cents on revenue of $3.35 billion.
Both numbers beat analysts' expectations and were higher than the same quarter in 2022. More importantly for investors considering a long position in KDP stock, analysts are projecting the company’s earnings to grow about 7.8% for the year.
However, macroeconomic uncertainty has been pushing down KDP stock which is down 12% in 2023 and over 6% in May alone. By contrast, Monster Beverage Corp (NASDAQ: MNST) stock is essentially the inverse of Keurig Dr Pepper. The stock is up over 10% in 2023.
With a market cap of approximately $57 billion as of this writing, Monster is a more accurate comparison to Keurig Dr Pepper which has a market cap of $44 billion. And from that standpoint, KDP stock does look undervalued with a P/E ratio of around 33x as opposed to Monster’s P/E which is over 47x. And with Keurig Dr Pepper investors can capture a dividend that has a decent yield of around 2.55%.
Look Beyond the Short-Term Noise Around Pfizer
Pfizer Inc. (NYSE: PFE) has been in the news for mostly positive reasons in 2023. The company announced its intention to acquire Seagen Inc. (NASDAQ: SGEN). But investors are tempering their enthusiasm since the Federal Trade Commission (FTC) announced its intention to block Amgen Inc.’s NASDAQ: AMGN planned acquisition of Horizon Therapeutics Plc NASDAQ: HZNP. As Kate Stalter recently wrote for MarketBeat, Pfizer still believes their deal for Seagen will go through. But investors are hedging their bets.
Even if the deal goes through, investors are weighing other short-term headwinds on the stock. Specifically, there is declining demand for its Covid-19 vaccinations. And the company is nearing a patent cliff for two of its cash cows, namely its Ibrance cancer drug and its blood thinner Eliquis.
To the first point, Pfizer is reporting slowing revenue from its vaccines and Paxlovid were not declining as rapidly as analysts expected. And in May the company announced positive results from a peer review study for a new obesity drug. If approved, the drug could go a long way to replacing the lost revenue from Ibrance and Eliquis.
That’s a lot of noise for investors to consider. But this is a time when investors should look at the broader picture. Whatever you may feel about mRNA technology, it is the future of medicine and Pfizer is on the forefront of that technology as well as the field of precision medicine. Plus, PFE stock is trading for 11x forward earnings which is below the 15x average for the pharmaceutical sector. And Pfizer offers a growing dividend with an attractive yield of over 4.5%.
Analysts Still Like CVS Health, Just a Little Less
At first glance, the current state of CVS Health Corporation (NYSE: CVS) is self-explanatory. Like many drugstore chains, CVS stock soared in 2021 as demand for Covid-19 vaccines increased store traffic and peripheral sales. That demand has tailed off and investors can now buy CVS stock near pre-Covid levels.
Should they? The drugstore chain is seeing growth in its telehealth business via its MinuteClinic subsidiary. The company is also taking strides to invest in areas like digital health and remote patient monitoring.
CVS Health beat on the top and bottom lines when it reported first quarter earnings. And both results were higher on a year-over-year basis. Analysts lowered their price targets after the results. But here’s where investors should take note. Virtually all of the price targets are above the consensus target and that means there could be value for a stock that trades at around 7x forward earnings with a dividend that has a yield of around 3.5% as of May 26, 2023.
