While it is quite natural to want to buy stocks that are gaining, the best way to profit is to look for the most down-beaten.
That’s because such stocks present a unique opportunity for exponential returns once they start to gain in value. Investors like Warren Buffet have grown immensely wealthy by buying in down markets.
One advantage to buying such stocks is that you get in at a low-risk level. Since the price is already significantly low, chances of further correction are minimal.
In contrast, when buying at the top, it is very easy to lose money if the stock enters a correction phase. That said, here are 3 beaten-down UK stocks with 10x potential.
- Reckitt Benckiser (RKT)
- London Stock Exchange (LSE)
- DCC (DCC)
Reckitt Benckiser (RKT)
A health and nutrition products company
Reckitt Benckiser (RKT) is down by 20.85% over the last year. However, there are lots of pointers that this stock could easily do 10x going forward.
One of the biggest confidence builders in this stock is that insiders are buying. In the last 12-months, the number of insiders buying this stock has shot up significantly. The largest insider purchase was by Harold Broek, who bought GBP 1.4 million worth of shares.
While insider buying is not a sure-fire way to tell the direction that a stock will take, it is usually a good indicator. It usually means that those who know most about a company have confidence in its prospects.
In the case of Reckitt Benckiser, this makes it quite attractive now that the stock is down by 20% in the year. If it starts gaining from its current price going forward, then the potential upside is huge.
Then there is the fact that the demand for cleaning products will likely remain strong. While demand for these products has slowed down as the pandemic fears drop, the need for disinfectants as a way to slow down the COVID-19 spread won’t go away.
Reckitt is also well positioned to navigate the possibility of cost-push inflation in the UK and other developed markets. That’s because it has sizeable operations, up to 40% of revenues, in the developing world.
In the developing markets, the company has leverage over supermarkets, which means it can drive up prices without affecting its margins. This will not only help it deal with inflation but record revenue growth going into the future.
This stock’s technical indicators point to a potential rebound too. On July 28th, it hit a low of GBP 5519 and seems to have established strong support at this price level.
It bounced off it in late July and has retested twice in August without pushing through. It has since made a significant jump off this support and is now close to testing the 50-day moving average resistance at GBP 5949.
This is an indicator that RKT may have hit the bottom. With the world economy on a rebound, there is a good chance that it can gain significantly from its current price levels.
London Stock Exchange (LSE)
A financial services firm
With the stock markets gaining traction as fears of pandemic uncertainty drops, the London Stock Exchange (LSE) is set for growth.
The stock of this financial services company is down by 4.86% in the last 12-months, but its prospects going into the future look pretty good.
Last month, the company announced a jump in profitability, driven by increased trading volumes. It reported that pre-tax profits for H1 of 2021 stood at GBP 510 million, up from GBP 262 million in 2020.
The only concern that the company has at this point is a potential increase in costs due to the COVID-19 pandemic. However, now that vaccine levels are on the rise all across the globe, this is unlikely to be a concern for much longer.
Such prospects make getting in now perfect timing in anticipation of a better operating environment going into the future.
Going forward, the value of the LSE will also be impacted positively by new high-profile listings on its derivatives market.
For instance, top UK tech executives have been pushing microchip maker Arm, to list on the LSE instead of being bought out by NVidia.
Aside from the fundamentals, the technical factors paint a pretty good picture for this stock. It bottomed out in early August and has since pushed through three key moving average resistance levels.
The most recent one was the 200-day moving average, and buying momentum is on the rise.
If this momentum continues, then the LSE could easily test prices above GBP 10,000 in the short term.
It is definitely a down-beaten stock worth buying, now that it has made a strong recovery from an 8-month low.
A sales and marketing heavyweight
DCC (DCC) a sales and marketing heavyweight especially for the oil and gas industry took a hit over the last 12-months. In this period, the stock lost by 4.86%, but prospects now look good.
Recently, the stock got an analyst upgrade to a “buy.” This upgrade was triggered by expectations that the company is likely to post improved revenues in the coming quarters.
This ranking upgrade is likely to drive optimism around this stock in the short to medium term. That’s because such rankings are often used by institutional investors when choosing whether to invest in a stock or not.
From a look at its charts, this stock is in a breakout, indicative of the increased buying momentum.
It bottomed out on 19th July after it found strong support at GBP 5828, on the 200-day moving average.
Since then it has pushed through two key resistance levels, the 100-day, and the 50-day moving average. DCC is now trading at prices it lasted tested in April.
There are multiple factors that could help push this stock higher from its current prices. One of them is its recent move to form a new unit called, Exertis North America.
Through this new unit, the company will manage its new acquisitions such as Jam Industries much better. This gives it a huge potential to grow revenues, and by extension, its share price can go up significantly going into the future.
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