- These stocks have dropped in value, but they have lots of upside potential.
- They have better fundamentals than a lot of other stocks out there.
- While prices are down today, the causes are short-term, and all 5 are solid long-term investments.
The best way to create wealth is to buy low and sell high. This entails being willing to take a counterintuitive move and buying stocks deep in the red today. However, it’s important to remember that not every beaten-up stock is a gem in the rough. Some of them are on a downtrend because of weakening fundamentals.
In essence, the most important factors to consider are a stock’s books, the market it operates in, among other fundamentals. If the fundamentals are good, then the chances of a high ROI from buying a beaten-up stock are very high.
Five stocks that have been falling in the past year that could be excellent buys today are AstraZeneca (AZN), Intertek (ITRK), Hargreaves (HL), Royal Mail (RMG), and BT Group (BT-A).
AstraZeneca easily makes it to the top of the list of beaten-up stocks to buy today. The stock has barely moved in the past year, and in the last 3-months, it has lost value.
Its performance in the past year has a lot to do with the fortunes of its COVID-19 vaccine. While it was the first company to release a successful COVID-19 vaccine, it quickly lost this market to its competitors, especially Pfizer.
That said, this company has many good things going for it and could turn around its fortunes going forward. This week, AstraZeneca has made a series of announcements that all point to potential value growth long term.
One of them is with regards to a breakthrough in an anti-cancer drug. The new drug called Enherthu has been shown to slow down the progression of breast cancer in 72% of the trial patients.
Besides the positive efficacy data and the reception, the breast cancer market is huge, which means Enherthu could give AstraZeneca a significant revenue boost in the future.
To understand how big of a deal this is, US data shows that 1-in-8 women will develop breast cancer in their lifetime. This means there is a huge market for drugs that can help save lives, which means profits for those with solutions.
AstraZeneca is also actively investing in the latest technologies for vaccine development. While the company missed out on using RNA technology in the COVID-19 vaccine, it is betting big on this tech long term.
The company has struck a deal with VaxEquity, a company that was founded by Imperial College’s vaccinologist Robin Shattock. Under the deal, AstraZeneca is set to reap the benefits of the startup’s self-amplifying RNA technology.
This move is a big deal because it has a number of benefits that beat the mRNA technology that Moderna and Pfizer are using.
That’s because the tech inputs instructions into a cell and makes copies of the RNA that has these instructions. This means vaccines can be made more cheaply.
This tech means AstraZeneca is well-positioned to make highly profitable vaccines in the future. That’s good for the company’s revenues, and by extension, its stock price going into the future.
AstraZeneca has also announced that it has recorded positive results in its phase 3 trial of LYNPARZA®. This is a treatment for metastatic castration-resistant prostate cancer.
A combination of these developments makes this company highly undervalued at current prices.
The company has some pretty solid books too. It has a current ratio of 1.23, which means it’s well-capitalized to pay all its current liabilities if they are called out to do it. It also means that AstraZeneca can easily borrow at good rates if it needs to do it.
Its cash flows are pretty good too, which means its operations can run smoothly even as it continues to make heavy investments in research.
It’s a perfect option for bargain hunters looking for beaten-up stocks to hold for the long haul.
Intertek is pretty beaten-up at current prices. The stock is down 8% in the year and hasn’t made much of a recovery in the last 3-months.
However, a closer look at this stock reveals a hidden gem. One of the biggest pointers to this stock’s potential is that insiders are buying it.
Over the past year, one of the biggest insider purchases has been by the company CEO, Andre Pierre, who also doubles up as a director. All through the year, he has bought £537K worth of this stock.
While insider buying is not a sure-proof way of determining that a stock will go up in the long run, it is always a good signal. It usually means those most in the know about a stock are confident in it.
In this case, the CEO, the main person in a company who drives the strategic vision, is the one who has been loading up on Intertek stocks. It’s a reason to be optimistic about the long-term prospects of this company, especially now that its price has been lagging the broader market for a year.
Insider buying aside, this company has been making moves that could prove beneficial to its stock price in the long run.
Back in June, Intertek announced that it was getting into a strategic partnership with Globizz. Through this partnership, Intertek would provide regulatory services for makers of medical devices in both the US and Japan.
This is a big deal for Intertek because of the size of the market involved. Japan and the US account for a significant percentage of the total medical devices market. These two countries also have some of the strictest medical products requirements in the world.
Since Intertek has experience in product quality controls, it stands to reap big from this deal. When signing the deal, the company’s Senior Vice President Sunny Rai said that they would use this opportunity to introduce new innovative products to the medical devices market.
This is an opportunity that could drive up this company’s revenues long-term, and by extension, push up its stock price.
Earlier in the year, the company announced something touching on another important aspect of the global market.
The company stated that its first-ever Canadian lab had received approval. Through this lab, the company will offer testing and certification services to Canadian makers of explosive atmospheres.
Through this lab, the company will be facilitating the makers of such products to access the EU market. At the time, the company stated that through this move, it was expanding to start offering its services to regional and global manufacturers.
The company’s aggressive growth strategy is also evident in the fact that it has issued body status for its labs in the US, Asia, and Europe. These notifications are for a wide array of schemes, giving the company reach across industries.
With such growth prospects, there is every indication that ATEX’s revenues could grow in the long run. By extension, this means its intrinsic value is set to grow, going into the future.
The company’s books are pretty attractive too. It has a current ratio of 1.07, a good indicator of the company’s prudent management of its assets and liabilities.
On top of that, it has positive cash flows, which means it can keep expanding its operations without affecting its day-to-day operations.
For a company with a lot going for it, and a stock price heavily beaten-up, Intertek is a no-brainer stock to buy now.
Hargreaves is in the red at the moment, and anyone who has held this stock for the last year is down by 7%. The selloff in this stock has only accelerated in the past three months when it has shed off about 11% of its value.
However, when looked at holistically, it becomes clear that this is actually a perfect time to buy the dip for this beaten-up UK stock at a bargain.
First off, the factors that have led to this stock’s value drop are short-term in nature. The drop was occasioned by a decrease in day-trading that had peaked during the pandemic.
However, now that the economy is returning back to normal, trading is set to return to normal too, guarantying this company consistent and more predictable returns long term.
Aside from the improving macro-environment, this company has some solid fundamentals too. For starters, this company is a dividend payer. On the 23rd of September, it paid a dividend of £0.39. Last year, it paid a dividend of £0.51, and its next dividend payment will be £0.39.
Dividend-paying companies in most cases tend to have strong books to back them up. Besides, it’s an assurance that you can make a passive income off this stock too. For instance, anyone who has been holding Hargreaves for the past year may have lost due to its price drop. However, they would still have recovered some of these losses through dividend payments.
This company’s books also present a picture of a stable and potentially growing company. The company’s quarterly revenues are growing at a healthy 13.10%. Its profit margins are also pretty high and are above the average of most industries. It has a profit margin of 47.02%, which means it is making close to 50% in profits from each of its sales.
Its current ratio of 1.70 also means that this company has more than enough resources to repay its short-term debt obligations, and still have assets left in its balance sheet. This is a big deal, as it cushions the company from any adverse changes in interest rates in the short term.
Hargreaves also has a positive cash flows of £328.6 million. This means in the short to medium term; it has the resources to operate comfortably without running into liquidity issues.
It’s a beaten-up UK stock that could give investors a huge return on investment long term.
Royal Mail is down by 16%, but investors holding this stock for the year are still up by over 100%.
For bargain hunters, this is a good time to load up on this stock. That’s because the factors behind its recent drop in price are short-term in nature.
The company recently announced that due to labor shortages, and increasing costs in the UK due to the upcoming holiday period, it expected profits to come under pressure.
For investors who can overlook these short-term pitfalls, this is a gem. The company is projecting that its parcel delivery business is on a growth trajectory. In fact, it is the parcel business that helped the company record a jump in revenues over the past 5-months.
With the UK economy slowly getting back to pre-pandemic levels, parcel deliveries are set to rebound too. This places Royal Mail in a unique position for growth in revenues. By extension, it makes this stock massively undervalued after shedding off 16% of its value in just 3-months.
For bargain hunters with an appetite for risk, BT is the perfect stock to buy now. It’s pretty beaten-up having been on a downward spiral for the last 5-years.
While those who bought this stock 5-years ago are in losses today, the stock is at an interesting level from a technical analysis point of view.
BT has been on a steady recovery since October 2020. Currently, it’s in what is called a golden cross in technical analysis. This is a scenario where a short-term moving average cuts a longer-term one from below. It’s usually an indicator that upside price momentum is on the rise.
In the case of BT, the 50-day moving average crossed the 100-day moving average from below in early August. In this case, upside momentum will be confirmed once the stock pushes through the 200-day moving average at GDp184.02.
Once it pushes through this price level, it could easily rally to GBp 200 and above in a very short time.
That’s a huge ROI for investors who take a risk on this stock in the hunt for bargain UK shares.
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