In this article, we discuss 13 best depressed stocks to buy now. If you want to skip our detailed analysis of the depressed stocks, you can go directly to the 5 Best Depressed Stocks To Buy Now.
The International Monetary Fund (IMF) in its latest projections anticipates global economic growth to fall to 2.9% in 2023 from 3.4% in 2022. Although this figure is 0.2% higher than the projections in the October 2022 World Economic Outlook (WEO), it is close to 1 percentage point lower than the historical (2000–19) average of 3.8 percent. According to IMF, the depressed economic outlook is down to the rapid spread of Covid-19 between 2020 and 2022, the war in Ukraine, and global inflation.
Given this scenario, many economies around the world are experiencing several problems, with high costs of living leading the way. In the United States, tightening interest rates to fight inflation is almost breaking the financial system. Banks and other large businesses that invested in government debt are facing the risk of collapse from rising yields. On the other hand, layoffs are increasing, with companies looking for more room to navigate the current challenging economic environment. For example, Meta Platforms, Inc. (NASDAQ:META) CEO Mark Zuckerberg just revealed the intention to lay off 10,000 employees merely months after shedding 11,000 workers. Analysts say this could be the beginning of the second round of massive layoffs in the global tech sector. In short, the global economy and indeed the US economy is depressed and the signs are showing up in individual stocks across the country’s massive equities market.
Typically, a substantial rise in unemployment, suppressed economic activity, bankruptcies, and substantial drops in the domestic product growth signify a difficult economic environment. The United States National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC) determines a recession based on specific indicators, including nonfarm payroll employment, employment as measured by the household survey, industrial production, real personal consumption expenditures, etc. Based on the movement of these key indicators, the Fed concluded back in September that the US is not in a recession.
Be that as it may, the economic environment is not very friendly, and this has led to some stocks trading at values that are significantly lower than their intrinsic values. Under challenging economic circumstances, it’s typical to observe stocks that are undervalued. Nonetheless, factors beyond the market environment, like herd mentality, negative media coverage, or cyclical patterns, could also contribute to a stock’s undervaluation. Additionally, if investor preferences shift to more popular sectors, it could drive up prices, while other sectors may experience reduced demand, leading to limited growth in share prices, even if the companies’ financials remain sound.
The stock market has experienced declines over the past twelve months, with the S&P 500, Dow, and Nasdaq all down by 10.69%, 6.42%, and 12.22% respectively. In this environment of falling equities and rising bond yields, identifying quality stocks can be difficult. Our article highlights some of the best depressed stocks, including Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), TotalEnergies SE (NYSE:TTE), and Exxon Mobil Corporation (NYSE:XOM).
With this background in mind, the question then arises, how can investors spot the depressed stocks that could become gems if conditions are right? It helps to note that different investors have unique methods for finding undervalued stocks. However, they typically start by looking at the target company’s price-to-earnings ratio, also known as PE ratio. The decision is then refined through a stock screener. Other financial ratios useful when looking for undervalued gems include discounted cash flow, the margin of safety, PEG, price to book, and the price to Graham number. Luckily, we have selected the 13 best-depressed stocks for you to buy now, so you won’t have to bother yourself with the ratios and financial acrobatics.
Our Methodology
Our selection process involved two phases; phase one involved defining the criteria for finding depressed stocks, and phase two involved ranking them. We chose The Deep Value ETF’s (DEEP) holdings to guide the selection process. But why choose DEEP, you may ask? This ETF is the brainchild of Roundhill Investments, a registered investments adviser that has sponsored ETFs that brought emerging themes like the Metaverse and Sports Betting to the mainstream. Therefore, we believe that $DEEP includes undervalued stocks with immense potential for a turnaround, and they only lack sufficient attention from the market.
Still in phase one, we defined a depressed stock as one whose current market price is within 10% of its 52-week low. Then came phase two. Here, we ranked these deep value stocks based on popularity among hedge funds in Q4 FY2022. Basically, our article lists the best depressed stocks to buy according to hedge funds.
Best Depressed Stocks To Buy Now
13. Marcus & Millichap Inc. (NYSE:MMI)
Number of Hedge Fund Holders: 11
Marcus & Millichap Inc. (NYSE:MMI) is a real estate investment brokerage and financing services provider operating in the US and Canada. Marcus & Millichap Inc. (NYSE:MMI) is currently priced at $31.09 as of March 15 and has seen its stock price fluctuate between a high of $58.33 and a low of $30.00 over the past year. Its current stock price is 3.51% above its 52-week low.
The company’s total revenue for 2022 was $1,302 million, a slight increase from 2021. However, total operating expenses increased by 5.2% compared to the previous year. Net income for 2022 was $104.2 million, a decrease from $142.5 million in 2021. The company’s adjusted EBITDA also decreased from $213.0 million in 2021 to $165.5 million in 2022. The number of investment sales and financing professionals decreased by 90 from the prior year. The company predicts a choppy market in the first half of 2023 but remains optimistic about long-term growth.
Marcus & Millichap, Inc. (NYSE:MMI) paid over $62.6 million in two regular semi-annual dividends and one special dividend since starting its dividend policy in February 2022 until December 2022. It currently pays a semi-annual dividend of $0.25 per share, resulting in a dividend yield of 1.61% as of March 16.
According to Insider Monkey’s database, 11 hedge funds owned stakes in the company at the end of the December quarter, down from 13 in the preceding quarter. Sprott Asset Management held the biggest stake in Marcus & Millichap Inc. (NYSE:MMI) at the end of Q4 2022 with 160,000 shares.
Marcus & Millichap Inc. (NYSE:MMI) is one of the best-depressed stocks to buy now, along with Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), TotalEnergies SE (NYSE:TTE), and Exxon Mobil Corporation (NYSE:XOM).
12. Interface, Inc. (NASDAQ:TILE)
Number of Hedge Fund Holders: 12
Interface, Inc. (NASDAQ:TILE) specializes in designing, producing, and selling modular carpet products domestically and internationally. On March 1, analyst David MacGregor from Longbow upgraded the company’s rating from ‘Neutral’ to ‘Buy’ and set a price target of $18. It is currently trading at a forward P/E multiple of 7.91x, below its industry average of 11.39x.
Interface, Inc. (NASDAQ:TILE) achieved strong results in 2022, with growth across all product lines and geographies. Despite a challenging macroeconomic environment, the company saw a 13% growth in net sales on a currency-neutral basis and an 8% increase in adjusted operating income year-over-year. There were continued reductions to both GAAP and adjusted SG&A expenses as a percentage of net sales. In 2022, the company’s GAAP operating income was $75.4 million, while adjusted operating income was $132.4 million, up 8% from the previous year’s $122.3 million. Interface, Inc. (NASDAQ:TILE) also declared a regular quarterly cash dividend of $0.01 per share, payable to shareholders on April 14, 2023.
However, hedge fund sentiment reflects the negative trajectory of Interface, Inc. (NASDAQ:TILE), held by 12 hedge funds during Q4 2022. In comparison, 13 hedge funds held stakes in Interface in Q3 2022. Cliff Asness’ AQR Capital Management is Interface, Inc. (NASDAQ:TILE)’s largest shareholder, with shares worth $1.18 million.
11. The Hackett Group, Inc. (NASDAQ:HCKT)
Number of Hedge Fund Holders: 13
Hackett Group, Inc. (NASDAQ:HCKT) is a consulting firm that offers strategic advisory and technology consulting services in the US, Europe, and internationally. The company’s shares have declined by 16.74% over the past 12 months, and its current P/E ratio is 12.74x. The Hackett Group, Inc. (NASDAQ:HCKT) shareholders will receive a $0.11 per share payment on April 7, yielding 2.4% and boosting returns.
Hackett Group, Inc. (NASDAQ:HCKT) exceeded their Q4 2022 revenue guidance by reporting $70.1M total revenue and $68.8M revenue before reimbursements, compared to the same quarter the previous year. They estimate Q1 2023 revenue before reimbursements to be in the range of $69.0M to $70.5M, with adjusted diluted EPS of $0.35 to $0.38 assuming a 22% GAAP effective tax rate.
Vincent Colicchio, an analyst at Barrington, lowered his price target on Hackett Group, Inc. (NASDAQ:HCKT) to $24 from $26 on February 23, while still maintaining an ‘Outperform’ rating on the shares. The reason for this decision was the downward revision of the company’s 2023 earnings estimates by the analyst, due to potential revenue headwinds.
At the end of the fourth quarter of 2022, 13 hedge funds owned a stake in Hackett Group, Inc. (NASDAQ:HCKT), down from 17 in the preceding quarter. Douglas T. Granat’s Trigran Investments held a significant stake in Hackett Group, Inc. (NASDAQ:HCKT) at the end of Q4 2022, worth $35.70 million.
Ariel Investments, an investment management company, mentioned Hackett Group, Inc. (NASDAQ:HCKT) in its Q4 2022 investor letter. Here is what the fund said:
“We purchased The Hackett Group, Inc. (NASDAQ:HCKT), a niche IT consulting firm that provides benchmarking studies, IT advisory and software implementation services to help clients optimize business processes and resource efficiency. Over the last 30 years, HCKT has accumulated nearly 20,000 studies with major organizations, including 93% of the Dow Jones Industrials and 91% of the Fortune 100. We believe this deep repository of best practices data serves as a point of differentiation, resulting in expertise and cross-selling advantages relative to a fragmented and homogeneous peer set. Several years of declining on premise software demand, compounded by the disruption of the pandemic, created an opportunity to own an underappreciated beneficiary of both a secular shift toward digital transformation, as well as increasing demand for subscription benchmarking data services.”
10. PC Connection, Inc. (NASDAQ:CNXN)
Number of Hedge Fund Holders: 13
PC Connection, Inc. (NASDAQ:CNXN) is a global provider of information technology solutions through its subsidiaries. The company has three operating segments: Business Solutions, Enterprise Solutions, and Public Sector Solutions. The current price of PC Connection, Inc. (NASDAQ:CNXN) stands at $42.19 as of March 15. PC Connection, Inc. (NASDAQ:CNXN) has experienced fluctuations in its stock price over the last 52 weeks, reaching a high of $56.68 and a low of $40.71. Currently, the stock price is 3.64% above its 52-week low.
In 2022, PC Connection, Inc. (NASDAQ:CNXN) experienced an 8% increase in net sales compared to the previous year, with a gross profit increase of 13.3% and a gross margin expansion of 78 basis points to 16.8%. Net income also increased significantly by 27.6% to $89.2 million or $3.37 per diluted share. In comparison, the net income for 2021 was $69.9 million or $2.65 per diluted share.
The number of hedge funds tracked by Insider Monkey having stakes in PC Connection, Inc. (NASDAQ: CNXN) grew to 13 in Q4 from 12 in the preceding quarter. These stakes hold a consolidated value of $16.60 million. Cliff Asness’s AQR Capital Management is the leading shareholder of PC Connection, Inc. (NASDAQ: CNXN), with 43,644 shares worth over $2.05 million.
9. Tupperware Brands Corporation (NYSE:TUP)
Number of Hedge Fund Holders: 13
Tupperware Brands Corporation (NYSE:TUP) is a global consumer products company that distributes its products to around 70 countries through independent sales force members such as distributors, directors, managers, and dealers. The forward P/E ratio of the company is 9.39x, which is below the industry ratio of 12.74x. Tupperware Brands Corporation (NYSE:TUP) stands ninth on our list of 13 best depressed stocks to buy now.
Tupperware Brands Corporation (NYSE:TUP)’s total net sales for the year were $1.3 billion, an 18% decrease from the previous year due to declining sales in regions outside of South America, where sales increased by 10%. Gross profit also decreased from the last year due to lower unit volumes and higher costs, while selling, general, and administrative expenses declined but increased as a percentage of sales due to lower fixed cost absorption. Tupperware Brands Corporation (NYSE:TUP) reported a loss from continuing operations of $28.4 million compared to income from the previous year, resulting in a loss per share of $0.62. Adjusted diluted earnings per share were $0.46.
DA Davidson analyst Linda Bolton Weiser has downgraded Tupperware Brands Corporation (NYSE:TUP) from a price target of $4.50 to $3.00 and has maintained a ‘Neutral’ rating on the company’s shares. The downgrade was due to Tupperware’s Q4 operating profit miss and disclosure of misstatements in prior periods. However, the firm notes that Tupperware’s currency comparisons are expected to improve significantly after Q1.
At the end of the fourth quarter of 2022, 13 hedge funds in the database of Insider Monkey held stakes worth $28.15 million in Tupperware Brands Corporation (NYSE:TUP), compared to 11 in the preceding quarter worth $18.05 million. D. E. Shaw is the largest stakeholder in Tupperware Brands Corporation (NYSE:TUP), holding 1.39 shares worth about $5.75 million.
Here’s what Miller Value Partners said about Tupperware Brands Corporation (NYSE:TUP) in its Q4 2022 investor letter:
“During the quarter we only had one detractor, Tupperware Brands Corporation (NYSE:TUP) whose share price was down more than 30%. The company is in a midst of a multi-year transformation focused on enhancing their global direct selling business, expanding their omnichannel presence, exiting non-core assets, rolling out new product innovation and enhancing the company technology and supply chain. Tupperware’s revenues have been adversely impacted by significant market weakness in Europe and China along with the company experiencing weaker volumes from implementing recent price increases. Management has undertaken a $100M cost reduction program and with the recent price actions beginning to offset commodity price pressures, the company should see profitability and cash flow generation improve over the coming year. In addition, management continues to make incremental investments in the business to further expand their omni-channel efforts and modernize their infrastructure. While it will take longer for the company to complete the turnaround plan, we believe the current share price has limited value for successfully completing the transformation.”
8. Kronos Worldwide, Inc. (NYSE:KRO)
Number of Hedge Fund Holders: 15
Kronos Worldwide, Inc. (NYSE:KRO) is a company that manufactures and sells titanium dioxide pigments (TiO2) globally, which are used to improve the whiteness, brightness, and durability of various products such as paints, coatings, plastics, paper, fibers, and ceramics. The company produces TiO2 in two crystalline forms, rutile, and anatase, and also offers specialty products for inks, foods, and cosmetics.
Kronos Worldwide, Inc. (NYSE:KRO) beat sales estimates in the fourth quarter with sales of $342.2 million but missed earnings with a loss of $0.18 per share. Sales dropped 31% from the year-ago quarter, which led to cost-cutting efforts that couldn’t keep up with the revenue drop. Kronos Worldwide, Inc. (NYSE:KRO) still reported a full-year profit of $0.90 per share, down 8% from 2021. Kronos announced a regular quarterly dividend of $0.19 per share on its common stock, payable on March 16, 2023, to stockholders.
Kronos Worldwide, Inc. (NYSE:KRO) has experienced fluctuations in its stock price over the last 52 weeks, reaching a high of $19.78 and a low of $8.27. Currently, the stock price is 130.27% below its 52-week high but 3.96% above its 52-week low.
At the end of Q4 2022, 10 hedge funds owned a stake in Kronos Worldwide, Inc. (NYSE:KRO), down from 14 in the preceding quarter. AQR Capital Management held a significant stake in Kronos Worldwide, Inc. (NYSE:KRO) at the end of the fourth quarter of 2022.
7. SIGA Technologies, Inc. (NASDAQ:SIGA)
Number of Hedge Fund Holders: 16
The primary focus of SIGA Technologies, Inc. (NASDAQ:SIGA), a commercial-stage pharmaceutical company in the United States, is on health security-related markets. Their key product is TPOXX, which is an oral antiviral medication used to treat human smallpox disease caused by the variola virus. The company is trading at a forward P/E ratio of 8.55x, lower than its industry ratio of 43.15x.
SIGA Technologies, Inc. (NASDAQ:SIGA) experienced exceptional growth in Q3 2022, with revenues of $72 million, representing a 1,400% annual increase compared to the same quarter in the previous year. In addition, the company received approximately $77 million in international orders for oral TPOXX from 13 customers, 12 of which were new in 2022. In 2022, roughly $71 million of these orders were delivered and recorded as international sales, a significant increase from the company’s global sales in 2021 and 2020.
As of the close of Q4 2022, 16 hedge funds in Insider Monkey’s database reported owning stakes in SIGA Technologies, Inc. (NASDAQ:SIGA), up from 15 in the previous quarter. These stakes are collectively valued at nearly $47.20 million. Touk Sinantha’s AltraVue Capital was the company’s prominent stakeholder in Q4.
6. Stewart Information Services Corp (NYSE:STC)
Number of Hedge Fund Holders: 16
Stewart Information Services (NYSE:STC) provides title insurance and real estate transaction-related services through its subsidiaries. Title insurance protects banks and homeowners from defects in the property’s deed. Although damages tend to be limited, banks require buyers to purchase title insurance before issuing a mortgage.
Stewart Information Services (NYSE:STC) and its competitors have a lucrative business providing title insurance for almost every home purchase in America. However, analysts are concerned about a downturn in demand for title insurance due to a slowdown in the housing market. Despite this short-term concern, the long-term outlook for title insurance is positive, and Stewart Information Services (NYSE:STC) stock offers a 3.8% dividend yield. Accordingly, the company has declared a cash dividend of $0.45 per share for the first quarter of 2023, payable on March 31, 2023, to common stockholders.
The current price of Stewart Information Services (NYSE:STC) is $38.65 as of March 16. It has experienced fluctuations in its stock price over the last 52 weeks, reaching a high of $69.57 and a low of $35.96. Currently, the stock price is 83.80% below its 52-week high but 4.99% above its 52-week low.
There were 16 hedge funds in our database that held stakes in Stewart Information Services Corp (NYSE:STC) at the end of the fourth quarter, compared to 18 funds in Q3 2022. Cliff Asness’s AQR Capital Management is the company’s most significant stakeholder, with 151,499 million shares worth $6.47 million.
Like Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), TotalEnergies SE (NYSE:TTE), and Exxon Mobil Corporation (NYSE:XOM), Stewart Information Services (NYSE:STC) is one of the best depressed stocks to buy now.
Click to continue reading and see 5 Best Depressed Stocks To Buy Now.
Suggested articles:
Disclosure: None. 13 Best Depressed Stocks To Buy Now is originally published on Insider Monkey.
