In this article, we will take a look at the 14 best depressed stocks to buy now. To see more such companies, go directly to 5 Best Depressed Stocks To Buy Now.
Legendary value investor Howard Marks started writing memos to investors decades ago. These memos are still very famous and the co-founder of Oaktree Capital stills writes memos to investors that are read widely among investor circles worldwide. In a latest memo, Marks recalls how many years ago when he started writing memos to investors he had written a sentence that went on to become a motto of Oaktree since the sentence proved its mettle and truth over the years:
If we avoid the losers, the winners will take care of themselves.
One of the fundamental truths in investing has been to avoid losers and control risks. You just cannot bet all your money on stocks that are highly risky. But in his September memo Marks talks at length to clarify a confusion: there’s a difference between risk avoidance and risk control. If you want to avoid risk, just do nothing and no harm will be done to you. But that comes at a cost, obviously. You won’t see any gains either. In the investing world, those who want to avoid risks should put their money in government-guaranteed Treasury bills and sleep peacefully. But the downside is that these bills post the lowest returns available. On the other hand, risk control mean living with the reality of the world where risk is a constant in almost every domain. What makes a smart investor stand out is their ability to take calculated risks. Marks said:
“Risks like this needn’t be avoided. If you have real insight, such risks can be borne prudently and profitably. I know several investors who take much more risk than Oaktree does and whose bad years are much worse than ours. But the few who possess genuine skill – what I call “alpha” (more on that later) – produce jumbo returns in their good years, such that their long-term returns are exceptional. Their clients are well rewarded . . . assuming they have enough intestinal fortitude to hang in through the bad years. Thus, risk-taking isn’t unwise per se, and risk avoidance is appropriate only for investors who feel they can’t survive tough times.”
Howard Marks of Oaktree Capital Management
Our Methodology
For this article first used a stock screener to list down all the stocks that recently fell to 52-week lows or are currently trading very close to their 52-week low values. From this long list of stocks we selected 14 stocks with the highest number of hedge fund investors. Therefore, these stocks are the best depressed stocks to buy according to smart money investors.
Best Depressed Stocks To Buy Now
14. Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX)
Number of Hedge Fund Holders: 36
Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX) shares have lost about 37% over the past one year. In August Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX) posted second quarter results. GAAP EPS in the period came in at $0.31 beating estimates by $0.35. Revenue in the quarter totaled $98.2 million, surpassing estimates by $60.06 million. As of the end of the second quarter of 2023, 36 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX). The biggest stakeholder of Amylyx Pharmaceuticals, Inc. (NASDAQ:AMLX) was Joseph Edelman’s Perceptive Advisors which owns a $105 million stake in the company.
13. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 37
Discount store company Dollar Tree, Inc. (NASDAQ:DLTR) plunged to its 52-week lows last month after the company’s quarterly results showed margin pressures as the company’s profit guidance’s midpoint was below the Street estimates.
Dollar Tree, Inc. (NASDAQ:DLTR)’s CEO said:
“Our outlook takes into consideration several factors including shifting sales mix, unfavorable shrink trends, higher diesel fuel prices, incremental savings on ocean freight, and our improved sales performance.”
Madison Investors Fund made the following comment about Dollar Tree, Inc. (NASDAQ:DLTR) in its second quarter 2023 investor letter:
“The bottom five individual contributors for the quarter were U.S. Bancorp, Progressive, Analog Devices, Dollar Tree, Inc. (NASDAQ:DLTR), and Danaher. Off-price retailer Dollar Tree’s margins disappointed this past quarter. Like much of the retail industry, they are contending with higher costs related to shrink as well as the mix of sales shifting away from higher margin areas towards lower margin categories like grocery. Despite the near-term disappointment, we remain optimistic that the company can improve its profit performance. New Chairman and CEO Richard Dreiling has completely overhauled the management team with an impressive roster of retail executives, and they are spearheading a great number of initiatives that should bear fruit over the coming years.”
12. Tower Semiconductor Ltd. (NASDAQ:TSEM)
Number of Hedge Fund Holders: 38
Tower Semiconductor Ltd. (NASDAQ:TSEM) shares have lost about 40% in value over the past one year. Tower Semiconductor Ltd. (NASDAQ:TSEM) cratered last month after Intel had to walk away from its planned acquisition of Tower as it failed to get the necessary regulatory approvals. Intel will pay a termination fee of $353 million to Tower Semiconductor Ltd. (NASDAQ:TSEM).
A total of 38 hedge funds out of the 910 funds tracked by Insider Monkey were long Tower Semiconductor Ltd. (NASDAQ:TSEM). The biggest stakeholder of Tower Semiconductor Ltd. (NASDAQ:TSEM) during this period was Richard Mashaal’s Rima Senvest Management which owns a $96 million stake in the company.
11. Insulet Corporation (NASDAQ:PODD)
Number of Hedge Fund Holders: 39
Insulin delivery systems company Insulet Corporation (NASDAQ:PODD) ranks 11th in our list of the best depressed stocks to buy now. Insulet Corporation (NASDAQ:PODD) fell recently after some data showed weight loss drugs can cause a decrease in the demand for insulin injections in patients with diabetes.
As of the end of the second quarter of 2023, 39 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Insulet Corporation (NASDAQ:PODD). The biggest stakeholder of Insulet Corporation (NASDAQ:PODD) during this period was Daniel Sundheim’s D1 Capital Partners which owns a $209 million stake in the company.
The Ithaka Group made the following comment about Insulet Corporation (NASDAQ:PODD) in its second quarter 2023 investor letter:
“Insulet Corporation (NASDAQ:PODD) is a medical device company focused on the design, development and commercialization of insulin pump systems for people with type 1 diabetes. Diabetes is a chronic, life-threatening disease for which there is no known cure. Insulet’s insulin pump system is superior to traditional multiple daily injections because it provides its users with a more accurate and pain free way to administer insulin when compared to injecting it via syringe multiple times per day. Insulet’s stock was under pressure following news that Medtronic purchased EOFlow, the manufacturer of the EOPatch, a tubeless, wearable and fully disposable insulin delivery device. While the EOPatch is not yet launched in the US, it is widely believed it will be available by the end of 2024, increasing competitive pressure on Insulet.”
10. Silicon Motion Technology Corporation (NASDAQ:SIMO)
Number of Hedge Fund Holders: 40
In July, MaxLinear (NASDAQ:MXL) announced its plans to terminate its planned $3.8 acquisition of Silicon Motion Technology Corporation (NASDAQ:SIMO).
As of the end of the second quarter of 2023, 40 hedge funds out of the 910 hedge funds tracked by Insider Monkey reported owning stakes in MaxLinear (NASDAQ:MXL). The biggest stakeholder of Silicon Motion Technology Corporation (NASDAQ:SIMO) was Israel Englander’s Millennium Management which owns a $96 million stake in the company.
9. PNM Resources, Inc. (NYSE:PNM)
Number of Hedge Fund Holders: 41
New Mexico-based energy holding company PNM Resources, Inc. (NYSE:PNM) shares have lost about 11% over the past one year. PNM Resources, Inc. (NYSE:PNM) fell amid a New Mexico Supreme Court hearing related to Avangrid’s (NYSE:AGR) planned purchase of PNM.
A total of 41 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in PNM Resources, Inc. (NYSE:PNM). The most significant stakeholder of PNM Resources, Inc. (NYSE:PNM) was Alec Litowitz and Ross Laser’s Magnetar Capital which owns an $89 million stake in the company.
8. ZoomInfo Technologies Inc. (NASDAQ:ZI)
Number of Hedge Fund Holders: 42
ZoomInfo Technologies Inc. (NASDAQ:ZI) is falling after the company posted weak Q2 results and cut its full-year revenue and earnings outlook. The results were followed by stock downgrades from several analyst firms. However, Citi analyst Tyler Radke earlier this month started covering ZoomInfo Technologies Inc. (NASDAQ:ZI) with a Neutral rating as he initiated Buy ratings in a couple of other tech stocks. The analyst said while the macro environment is still murky, it looks as if there are some “green shoots” starting to emerge.
Radke said ZoomInfo Technologies Inc. (NASDAQ:ZI)’s medium and long-term growth could remain challenged amid competition.
As of the end of the second quarter, 42 hedge funds tracked by Insider Monkey were long ZoomInfo Technologies Inc. (NASDAQ:ZI). The biggest stakeholder of ZoomInfo Technologies Inc. (NASDAQ:ZI) was Mick Hellman’s HMI Capital which owns a $274 million stake in the company.
Baron Opportunity Fund made the following comment about ZoomInfo Technologies Inc. (NASDAQ:ZI) in its second quarter 2023 investor letter:
“ZoomInfo Technologies Inc. (NASDAQ:ZI) provides go-to-market business intelligence software. We took advantage of continued weakness in ZoomInfo shares to rebuild our position at attractive prices following tax-loss sales earlier in the year. ZoomInfo is a highly profitable and cash-generative business with the most comprehensive platform of software and data to improve the go-to-market efforts of its customers, not to mention new products in the marketing and talent-acquisition verticals. When the macro headwinds abate, we believe ZoomInfo will accelerate growth as it continues to penetrate its $70 billion-plus total addressable market.”
7. Farfetch Limited (NYSE:FTCH)
Number of Hedge Fund Holders: 42
Beauty products company Farfetch Limited (NYSE:FTCH) shares fell after the company posted weak Q2 results and several analyst firms downgraded the stock. Morgan Stanley downgraded Farfetch Limited (NYSE:FTCH) to Equal-Weight from Overweight and decreased its price target to $5 from $20. Morgan Stanley said Farfetch Limited (NYSE:FTCH) “meaningfully” missed its initial full year financial outlook for the second year in a row.
During Farfetch Limited (NYSE:FTCH)’s Q2 earnings call, Farfetch’s management talked about the challenges in China:
“So we believe that the right thing to do is there for to be prudent and adjust our plans and also adjust our spending with reduced demand generation spending double digits in the U.S. We’ve reduced it in China as well in face of the macro environment, which is across the industry, it’s not Farfetch specific. So China is improving and with a sequential improvement. We believe it will be in single-digit negative based on everything we’re seeing and taking a balanced outlook for the rest of the year, long-term tremendous opportunity. Obviously, second largest luxury goods market, and we have an impressive consumer proposition when we continue to see incredible potential in that business and in the partnerships we have in that country. Short term, there’s these movements that need to be navigated.”
Read the full earnings call transcript here.
Polen U.S. SMID Company Growth Strategy made the following comment about Farfetch Limited (NYSE:FTCH) in its Q4 2022 investor letter:
“Farfetch Limited (NYSE:FTCH) is an online marketplace for luxury goods. The stock was down -35% on the back of an investor day where management issued targets that implied decelerating growth. While this is a disappointing development in what has shaped into a disappointing year for the stock, we are maintaining our position with a focus on the long-term opportunity. Luxury fashion is still in a very nascent stage of migrating online. Farfetch—through partnerships and deep relationships it has built over many years— remains very well positioned to benefit from this trend.”
6. Illumina, Inc. (NASDAQ:ILMN)
Number of Hedge Fund Holders: 43
Illumina, Inc. (NASDAQ:ILMN) shares fell in August after the company cut its full-year guidance. Evercore ISI included Illumina, Inc. (NASDAQ:ILMN) in its Tactical Outperform list, citing the possible hiring of a new CEO. Earlier this month Illumina, Inc. (NASDAQ:ILMN) indeed appointed Jacob Thaysen as the company’s new CEO, effective Sept. 25.
RiverPark Large Growth Fund made the following comment about Illumina, Inc. (NASDAQ:ILMN) in its Q2 2023 investor letter:
“Illumina, Inc. (NASDAQ:ILMN): Illumina was our top detractor in the quarter despite reporting first quarter results that were generally in line with expectations and reaffirming full-year guidance. Uncertainty around activist investor Carl Icahn’s impact on the business, the change of CEO and the possible forced divestiture of liquid biopsy subsidiary Grail (early-stage cancer screening via blood samples) all weighed on Illumina’s stock price.
We continue to view the company’s core genomics industry as offering one of the larger total addressable markets that we cover, and ILMN is the clear innovation leader in sequencing and array-based solutions for genetic analysis. With less than 0.02% of humans having been sequenced and 99% of the variants discovered in the genome having not yet been deciphered, Illumina, at less than $5 billion of TTM revenue, is still in its infancy in what is potentially a greater than $50 billion genetics analysis tools market opportunity. We believe Carl Icahn’s involvement is neutral to slightly positive to the extent he can help the company be more disciplined on expenses. We are cautiously optimistic that EU regulators’ push to force Illumina to divest Grail will lead to either or both 1) much higher core earnings or 2) a big valuation for Grail in a sale. We added to our ILMN position during the quarter; it is a core holding.”
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Disclosure: None. 14 Best Depressed Stocks To Buy Now is originally published on Insider Monkey.
