In this article, we will look at the 10 Best Depressed Stocks To Buy Heading into 2025.
Will a Strong Earnings Season Help Overcome Election Volatility?
In one of our recent articles about 10 High Growth Non-Tech Stocks That Are Profitable in 2024, we talked about how the US market has continued to show resilience against economic and market challenges. We also covered the analysis of Anastasia Amoroso, iCapital chief investment strategist regarding the current market conditions. Here’s a short excerpt from the article:
“Anastasia Amoroso, the iCapital chief investment strategist, recently appeared on a CNBC interview to talk about the current market conditions.
She mentioned that investors had many reasons for caution to start October. Several outside moves had to be digested including yields spiking, the price of oil spiking, and some resurgence for the dollar. However, the market has been able to absorb all these moves quite impressively. She mentioned that the Fed is not likely going to cut rates by 50 basis points in the consecutive meetings and the markets have now repriced it to 25 basis points cut, which is now reflected in the yield prices.
Amoroso thinks that what could have been a bumpy start to the month has now paved the way for a soft landing momentum. While talking about how the rate cut is now a moving target for the Fed, she mentioned that it has always been known that the Fed reacts to data and it is not bad news that data is pointing towards an upside. Moreover, what’s more interesting is that not only is the Fed talking about the economy being on a strong footing but corporations including banks are calling it a soft landing, which is breathing new life into the market.”
As the market has entered the early stage of the earnings season, analysts are expecting earnings to help buffer the volatility that might come from the elections. Alan McKnight, Regions Wealth Management CIO, joined CNBC for an interview to talk about how the rate cut environment is reflected in the earnings. He thinks although it is very early to make any judgments regarding the earnings, however, as far as the recent data is concerned it is painting a positive image. He also mentioned that the good thing about the earnings so far is that overall management and CEO sentiment regarding their companies is positive and most are not expecting any weakness as we approach the end of the year.
While answering the question whether the current positivity is a trickle-down effect of the interest rate cut. McKnight thinks that the effect of the rate cut has not kicked in yet, what we are witnessing is a very strong consumer environment led by encouraging spending. The US consumer has been resilient and wants to spend, moreover, the rate-cut environment is enabling them to continue spending.
The earnings expectations have been lower moving in but they continue to rise as we reach the year’s end. McKnight thinks that this is going to be one of the key challenges for companies moving into 2025. Companies have been able to layer in some operating margin improvement, including sales growth. However, next year, they will have to sustain this growth, which is going to be difficult. Therefore, he sees growth coming down in 2025. He also pointed towards valuations becoming a problem if growth comes down, because the market is currently trading at a forward price-to-earnings ratio of 22 to 23, and companies would have to at least maintain current-year earnings growth to be fairly valued.
The interest rates are coming down, which should technically bring down the cost base for the market. However, the cost base never comes down as quickly as the market would like, similar to inflation, that’s where companies would find it challenging to maintain high growth rates.
McKnight advised that investors should stay balanced while investing, he mentioned that investors shouldn’t be chasing high flyers or just the big names that have been working, instead have a broad portfolio based on quality. Moreover, while mentioning the sectors he likes, McKnight mentioned Utilities and Communication Services. He thinks that the current news regarding the expected growth in the power sector along with the discussion of nuclear power for data centers is going to shape utilities over the next 3 to 5 years.
With that, let’s take a look at the 10 best-depressed stocks to buy heading into 2025.
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Our Methodology
To curate the list of the 10 best-depressed stocks to buy heading into 2025, we used the Finviz stock screener and Yahoo Finance. We defined depressed stocks as those trading within 0% to 3% of their 52-week lows. Using the Finviz stock screener, we got an aggregated list of stocks that fit our criteria. Next, we ranked these stocks based on the analyst upside potential sourced from CNN. All indicators were recorded on October 17th, 2024.
Moreover, we have also mentioned the number of institutional investors holding each stock sourced from the Insider Monkey database. Please note that the list is ranked in ascending order based on the analyst upside potential.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Depressed Stocks To Buy Heading into 2025
10. NOV Inc. (NYSE:NOV)
52 Week Range: $15.47 – $21.53
Current Share Price: $15.68
Number of Hedge Fund Holders: 29
Analyst Upside Potential: 40.31%
NOV Inc. (NYSE:NOV) provides essential equipment and technology for the international oil and gas industry. It operates mainly in two segments namely, Energy Products and Services and Energy Equipment.
The Energy Products and Services segment specializes in providing tools necessary for drilling oil and gas, including drill bits, downhole tools, and drilling fluids. It also helps companies develop wells after they have been drilled and provides services to optimize their performance, ensuring that companies can work effectively during drilling and production operations.
Whereas, through its Energy Equipment segment NOV Inc. (NYSE:NOV) produces drilling rigs and related equipment that are used in both offshore and inland drilling.
The company reported its second quarter results on July 25th indicating a 6% year-over-year increase in its revenue. The revenue for the quarter amounted to $2.2 billion benefitting from a 6% growth in offshore sales, which overshadowed the 1% decline in North American sales. In a move to focus on its core business, management divested the Pole Products business, resulting in a net income of $226 million, or $0.57 per share for the company.
NOV Inc. (NYSE:NOV) benefits significantly from its offshore and international markets business. Offshore operations account for around 44% of the total revenue whereas international business contributes 62%. Moreover, it differentiates through its integration of emerging technologies, particularly artificial intelligence into its platform. The company has been utilizing AI in its KAIZEN app to help customers optimize drilling operations. This includes writing code for new software products that leverage AI capabilities.
Management has also started to apply AI to its operations across more than 50 manufacturing facilities to optimize capacity, improve machine utilization, and speed up production.
NOV Inc. (NYSE:NOV) is one of the best-depressed stocks to buy heading into 2025. It is currently trading close to its 52-week lows, however, analysts’ 12-month median price target is pointing towards a 40% upside from the current levels.
Ariel Appreciation Fund stated the following regarding NOV Inc. (NYSE:NOV) in its Q3 2024 investor letter:
“Alternatively, drilling and production equipment provider, NOV Inc. (NYSE:NOV) weighed on returns over the period despite the company’s solid business fundamentals. NOV delivered a top- and bottom-line earnings beat, highlighted by rising demand in offshore and international markets, strong backlog order conversion, effective cost controls and robust free cash flow generation. Although a softening oil outlook in North America drove management to modestly lower full year guidance, the company continues to return capital to shareholders through a recent 50% dividend hike and $1 billion share repurchase authorization. As NOV right-sizes its onshore business and grows a more efficient offshore business, we believe the market will recognize the long-term value and re-rate the shares.”
9. Moderna, Inc. (NASDAQ:MRNA)
52 Week Range: $55.70 – $170.47
Current Share Price: $57.31
Number of Hedge Fund Holders: 39
Analyst Upside Potential: 43.08%
Moderna, Inc. (NASDAQ:MRNA) is a biotechnology company that focuses on developing new types of medicines using Messenger Ribonucleic Acid (mRNA). Messenger RNA (mRNA) is a molecule that carries genetic instructions from DNA to the cells, telling them how to make proteins. The company uses this technology to create vaccines and treatments for various diseases.
It specializes in developing vaccines for infectious diseases such as COVID-19, influenza, and respiratory syncytial virus. They are also working on developing cancer treatments and other rare autoimmune diseases.
Moderna, Inc. (NASDAQ:MRNA) has been making significant advancements in its respiratory vaccine portfolio. The respiratory segment is designed to positively affect millions of lives each year, aligning with the company’s mission to make a meaningful impact on patient health. Its mRNA-1273 vaccine, known as Spikevax, remains crucial in combating COVID-19.
During the second quarter of fiscal 2024, the company launched its RSV vaccine, branded as mRESVIA, in the United States. Moreover, its mRNA-1010 has shown positive results in Phase III trials along with mRNA-1083, which also demonstrated promising results. It has achieved positive results for all five of its respiratory vaccines under development and plans on filing approval for 3 new products this year.
The revenue for the company was $241 million during the quarter, however, net income was a negative figure reporting a loss of $1.3 billion. Regardless of the loss Moderna, Inc. (NASDAQ:MRNA) ended the quarter with $10.8 billion cash and investment position, and is focused on operational efficiency, having reduced operating expenses by over $600 million compared to the previous year. It is one of the best-depressed stocks to buy heading into 2025 as analysts’ median price target is pointing toward a 43% upside from the current level at a time when the stock is trading close to its 52-week low.
8. Perrigo Company plc (NYSE:PRGO)
52 Week Range: $23.89 – $34.60
Current Share Price: $24.30
Number of Hedge Fund Holders: 39
Analyst Upside Potential: 56.38%
Perrigo Company plc (NYSE:PRGO) provides over-the-counter (OTC) health and wellness products in the United States and Internationally. They develop and sell a wide range of self-care products that help people manage their health without needing a prescription including upper respiratory products, pain and sleep aids, skincare and personal hygiene products, and nutritional supplements.
The company sells its products under various renowned brand names, including Compeed, Mederma, Nasonex, and Coldrex.
Management has made notable advancements in its infant formula segment and is actively pursuing sustainable growth strategies for its United States store brand business. They dedicated significant resources to enhance their infant formula offerings, resulting in a positive impact on organic net sales and earnings per share. Specifically, their efforts contributed 5.3% in organic net sales and added $0.43 to earnings per share compared to the previous year.
During the second quarter of fiscal 2024, there was a notable decline in consumption of cough/cold and allergy products, attributed to lower seasonal incidences and inventory adjustments among its United States retailers. This decline negatively impacted net sales by approximately 10.7% year-over-year during the second quarter.
Management of Perrigo Company plc (NYSE:PRGO) has indicated that they might make strategic decisions to walk away from certain business segments that are diluting margins. The company made around $139 million in operating income, which is a 1.5% increase year-over-year by prioritizing core business and through its supply chain renovation strategy.
Looking ahead, management remains optimistic about its infant formula recovery and return to growth with its strategic measures focusing on improving margins and operational efficiency.
Meridian Contrarian Fund stated the following regarding Perrigo Company plc (NYSE:PRGO) in its Q2 2024 investor letter:
“Perrigo Company plc (NYSE:PRGO) is the leading in-store brand for consumer wellness and self-care products. The company endured several years of declining earnings due to what we believe was poor capital allocation by its previous management team, which chased growth through acquisitions outside of Perrigo’s core business. Our investment in Perrigo was inspired by a new management team that committed to pursuing realistic, steady growth rates within the core business, and delivering improved profitability and returns on capital. Despite reporting inline earnings results and maintaining annual guidance during the quarter, Perrigo stock has been weak. Market data and drug store company results have indicated a lower-than-average cough, cold, and allergy season that might be impacting short-term results. We increased our position as we believe the risk vs. reward is in our favor. In our view, Perrigo is well positioned for significant earnings growth in 2025 and beyond while trading at a current valuation of 10x current year earnings per share.”
7. Civitas Resources, Inc. (NYSE:CIVI)
52 Week Range: $49.10 – $79.97
Current Share Price: $50.23
Number of Hedge Fund Holders: 52
Analyst Upside Potential: 61.26%
Civitas Resources, Inc. (NYSE:CIVI) is an independent oil and gas company based in Colorado, primarily focused on producing energy from two major areas including the Denver-Julesburg Basin and the Permian Basin. The company has significant land holdings, with about 453,600 net acres in the DJ Basin and 68,500 net acres in the Permian Basin. Their total production is approximately 280,000 barrels of oil equivalent per day.
The company has undergone significant transformation in the past year, particularly with its entry into the Permian Basin, which has enhanced its operational scale and quality. This strategic move has provided the company with greater flexibility in capital allocation and created a more sustainable business model.
During the second quarter of fiscal 2024, the Permian Basin sales increased by 12% subsequently mainly due to strong production in its Delaware and Midland Basin wells. The overall revenue of Civitas Resources, Inc. (NYSE:CIVI) grew by more than 98% year-over-year, with crude oil making up around 87% of the revenue.
Another key highlight for the quarter came in as lower-than-expected operating expense of $8.97 per barrel of oil. Moreover, the Well costs in the Midland Basin have come down by 10% lower than its initial cost indicating that the company has gained operational efficiency and is generating greater margins per barrel of oil produced.
It is one of the best-depressed stocks to buy heading into 2025 because the stock is currently trading close to its 52-week lows while analysts are expecting its price to shoot up by 61% during the year.
Diamond Hill Mid Cap Strategy stated the following regarding Civitas Resources, Inc. (NYSE:CIVI) in its Q2 2024 investor letter:
“Despite rising valuations, we continue finding attractively valued, quality companies the market is overlooking amid its increasingly narrow focus on the mega-cap technology stocks dominating the major indices. In Q2, we introduced new positions in Sysco Corporation, Civitas Resources, Inc. (NYSE:CIVI), Labcorp Holdings and VeriSign.
Civitas Resources is an oil and natural gas explorer and producer focused primarily on the DJ Basin. It has recently made several acquisitions in the Permian Basin as it attempts to expand and diversify its holdings beyond the DJ Basin — a decision that we appreciate. It has low-cost drilling inventory, and we believe the management team responsibly runs the company. We added it to the portfolio in Q2, as we think its assets and cash-generation potential remain undervalued by the market.”
6. Veren Inc. (NYSE:VRN)
52 Week Range: $6.02 – $9.28
Current Share Price: $6.12
Number of Hedge Fund Holders: 26
Analyst Upside Potential: 62.06%
Veren Inc. (NYSE:VRN) is an oil and gas company based in Calgary, Canada. It focuses on producing oil and natural gas from its properties located primarily in central Alberta and parts of Saskatchewan. It was formerly known as Crescent Point Energy until it was rebranded in 2024.
The company continues to perform well in the Alberta Montney and Kaybob Duvernay regions, with recent wells ranking among the best in the Western Canadian Sedimentary Basin. During the second quarter of fiscal 2024, it generated around 192,648 boe/d, which was well within its 2024 annual average production guidance of 191,000 to 199,000 boe/d.
The total funds flow for the quarter was $611.7 million mainly due to a strong operating netback of $40.00 per boe. Out of this, the net income was $261.0 million and the company was also able to reduce its net debt by $620 million to bring it to $3 billion. Veren Inc. (NYSE:VRN) aims to generate around $825 million in excess cash for the full year and will continue returning 60% of its excess cash to its shareholders. The company ranks 6th on our list of best-depressed stocks to buy heading into 2025.
5. Talos Energy Inc. (NYSE:TALO)
52 Week Range: $9.58 – $16.99
Current Share Price: $9.87
Number of Hedge Fund Holders: 21
Analyst Upside Potential: 62.11%
Talos Energy Inc. (NYSE:TALO) is an independent energy company primarily involved in exploring and producing oil and natural gas. They focus on finding and extracting oil and natural gas from the ground, particularly in the Gulf of Mexico and offshore Mexico. As per the management, it is the fifth-largest operator in the Gulf of Mexico and the fourth-largest acreage holder in the Gulf of Mexico. The company has set its 2024 production guidance between 89,000 and 95,000 barrels of equivalent a day.
As far as its latest production figure is concerned, during the second quarter of fiscal 2024, the company reached a production level of 95.5 MBOE/D, comprising 73% oil and 81% liquids. As a result of strong production the adjusted EBITDA came in at $344 million with a adjusted free cash flow of $148 million. Management has been investing in capital projects which resulted in a 36% reinvestment rate without additional spending on plugging and abandonment and 42% including it.
Talos Energy Inc. (NYSE:TALO) is also developing a high-impact project called the Monument project, expected to add significant value with an estimated production capacity of up to 30,000 barrels per day. Moreover, it was also able to reduce its debt by $100 million. For the third quarter, the company expects to produce 92,000 and 97,000 barrels equivalent a day.
4. Seadrill Limited (NYSE:SDRL)
52 Week Range: $36.01 – $56.46
Current Share Price: $36.54
Number of Hedge Fund Holders: 41
Analyst Upside Potential: 62.23%
Seadrill Limited (NYSE:SDRL) ranks 4th on our list of best-depressed stocks to buy heading into 2025. It operates in offshore drilling, primarily for the oil and gas industry. They specialize in drilling in various seawater depths from shallow waters to more than 12,000 feet around the world. The company operates through a fleet of specialized vessels and rigs including, drillships, Semi-submersible Rigs, and Jack-up Rigs.
In the second quarter of fiscal 2024, Seadrill Limited (NYSE:SDRL) reported an EBITDA of $133 million on total operating revenues of $375 million, resulting in an EBITDA margin of 35.5%. The company had a strong first half of the year ending June 2024, achieving a combined EBITDA of $257 million. However, expectations for the second half have been lowered due to revised contract start dates for two rigs moving to Brazil and uncommitted availability on other rigs.
Management is preparing for a transition year in 2024, operating fewer rigs while focusing on long-term contracts and necessary maintenance. The company is willing to incur idle time to reposition and reintegrate rigs effectively. For instance, the West Polaris was relocated from a contract in India to a market-rate contract in Brazil.
Operationally speaking, 5 rigs of the company achieved nearly 100% uptime during the quarter, showcasing strong performance and commitment to continuous improvement. Moreover, it also generated $79 million in cash flow from operations and $36 million in free cash flow during the quarter.
Patient Capital Management stated the following regarding Seadrill Limited (NYSE:SDRL) in its Q3 2024 investor letter:
“Energy names disappointed in the quarter following commodity prices lower throughout the period. We took the opportunity to add to our highest conviction ideas. We look to names that have idiosyncratic opportunities and are attractive in a variety of different commodity price environments. Many see risk to energy prices over the next year as supply is expected to outstrip demand by 1.3mb/d even before assuming any incremental OPEC supply comes onto the market. With commodities, consensus is rarely right. We assess companies on through cycle returns and normalized prices. From this perspective, we see a handful of attractive opportunities, including Energy Transfer (ET), Seadrill Limited (NYSE:SDRL) and Kosmos (KOS).
Seadrill benefits from a consolidated industry, with more rational players, and an emerging supply and demand imbalance. We think over time as offshore drilling plays a bigger role as the marginal producer, Seadrill will benefit from more attractive contract prices.
Seadrill Limited (SDRL) is the fourth largest pure play deepwater drilling specialist. The company emerged from bankruptcy in February 2022 with a net cash position. The company is set to benefit from limited supply and increasing demand in the deepwater drilling rig market. Nearly half of all deepwater drilling rigs in the world were scrapped during the last decade. In addition, player consolidation puts the industry in a more rational position than we have seen historically. As land-based oil production growth comes under pressure, offshore production is receiving renewed interest. With a highly specialized rig base, the company is benefiting from increasing prices which are leading to strong FCF yields given the limited need for CAPEX. The company has committed to returning 50% of free cash flow to shareholders via dividends and buybacks. Over the last 12-months, the company has reduced shares outstanding by 17%. As old contracts roll-over and new contracts are signed at the higher day rates, operating profit and FCF are expected to expand dramatically. Seadrill could either consolidate the space or be acquired.”
3. Borr Drilling Limited (NYSE:BORR)
52 Week Range: $5.09 – $7.61
Current Share Price: $5.10
Number of Hedge Fund Holders: 11
Analyst Upside Potential: 69.74%
Borr Drilling Limited (NYSE:BORR) is another offshore drilling services company that focuses on shallow-water areas. They specialize in Jack-up Rigs, which are platforms that can be raised above the water to drill for oil and gas in shallow waters usually up to 400 feet deep. The company owns 24 modern rigs which they rent to clients on a daily basis, earning them rental income.
The company has operations in the North Sea, Mexico, West Africa, Southeast Asia, and the Middle East. It recently delivered a new jack-up rig, The Vale, and is on track to deliver another, The Var, by late FQ4 2024. During the second quarter of fiscal 2024, Borr Drilling Limited (NYSE:BORR) delivered an adjusted EBITDA of $136.4 million, up from $116.8 million during the first quarter. Moreover, its EBITDA margins also bested its guidance by 2 basis points and came in at 50.2% while the expectations were 50%.
All of the company’s rigs are contracted, indicating that it continues to secure contracts at favorable day rates, including a long-term contract for the Arabia I rig in Brazil. Moreover, management also revealed that they have achieved a technical utilization rate of 99.2% and an economic utilization rate of 98.4% in the second quarter, indicating strong operational performance. It is one of the best-depressed stocks to buy heading into 2025.
2. Sasol Limited (NYSE:SSL)
52 Week Range: $6.2 – $13.83
Current Share Price: $6.37
Number of Hedge Fund Holders: 11
Analyst Upside Potential: 78.03%
Sasol Limited (NYSE:SSL) is an international chemical and energy company based in South Africa. The company operates through an energy and chemical division, where the energy division is divided into mining, gas, and fuel segments. On the other hand, within the chemical division, the company manufactures high-performance materials used in various industries.
Sasol Limited’s (NYSE:SSL) H2 2024 revenue declined by 5% year over year to ZAR 275.1 billion ($15.62 billion), largely due to lower chemical prices and volumes sold, as well as inflationary pressures. Moreover, the company also reported a substantial decrease in cash generation and profitability. Adjusted EBITDA fell by 9%, and free cash flow decreased by 60% year-on-year.
However, there were some positive highlights for the company as well, including the mining productivity improving by 3% and Mozambique gas production improving by 6%. Management has also initiated cost reduction measures, resulting in a 1% increase in cash fixed costs, which is below inflation rates. They also achieved a 5% decrease in cash fixed costs through focused initiatives. Moreover, the free cash flow generation improved by 100% between H1 and H2 of fiscal 2024.
Although the stock is trading close to its 52-week lows the analysts expect its price to grow by around 78% during the year, making it one of the best depressed stocks to buy heading into 2025.
1. Cosan S.A. (NYSE:CSAN)
52 Week Range: $8.41 – $16.45
Current Share Price: $8.52
Number of Hedge Fund Holders: 7
Analyst Upside Potential: 97.93%
Cosan S.A. (NYSE:CSAN) is a Brazilian company operating in the energy and agribusiness sectors. They have several business areas, including Raizen Energy which produces and sells products made from sugarcane, while also generating energy from the leftovers. Moreover, their Raízen Combustíveis segment focuses on distributing fuel through gas stations operating under the Shell brand name.
During the second quarter results of fiscal 2024, management mentioned that they are focusing on capital discipline to tackle the challenging interest rate environment. This disciplined approach supports the growth of its contracted projects and ensures ongoing investments in structural initiatives across its various business segments.
Financially speaking, Cosan S.A. (NYSE:CSAN) improved its EBITDA from BRL 6.2 billion in the comparable quarter from fiscal 2023 to BRL 7.1 billion during the current quarter. The increase in earnings was due to higher transported volumes within its Rumo segment. The volumes for the segment were up 3% year-over-year.
It is one of the best-depressed stocks to buy heading into 2025, we say this because the stock is currently trading within 3% of its 52-week low. However, analysts are expecting its price to grow by around 98% making it an attractive investment opportunity.
While we acknowledge the potential of Cosan S.A. (NYSE:CSAN) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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