In this article, we present the 15 Best Beaten Down Stocks to Buy Now. If you’re in a hurry, click to skip ahead to the 5 Best Beaten Down Stocks to Buy Now.
Investing in beaten-down stocks can be tricky. If an investor chooses the right stock at a certain price and sells the shares at the right time, they are more likely to realize large capital gains. In most cases though, there are multiple reasons why beaten down stocks are down and these stocks may not recover their losses at all for a very long time (or ever). There is no exact formula to generate capital gains in beaten-down stocks. However, according to the editor of the Turnaround Letter, George Putnam III, the key to success is being able to go against the crowd.
“You have to have a strong stomach and be willing to go against the crowd. If you wait until the recovery is established, everyone piles in and you only get a fraction of the potential profit.”
A beaten-down stock can be viewed as a potential opportunity. Many investors can take advantage of a good performing company with a very low stock price. This can be considered as a buying opportunity to buy and hold a stock until it bounces back. Once the stock bounces back, it can make a big profit.
For instance, In a report by CNBC, according to Rob Williams, Vice President of financial planning at Charles Schwab over the last 20 or so years, the S&P produced an average annual return of around 6%. But if you missed the best 20 days in the market over that time span, by, for example, capitulating in declines, and then reinvesting later, your average annual return would shrivel to 0.1%.
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The decision to invest in beaten-down stocks can be less challenging when an investor is able to identify whether the stock is poised for recovery. The COVID-19 pandemic has left us with an extremely volatile market. Many investors missed out on the gains by selling too early. But as Allan Roth, founder of financial advisory firm Wealth Logic in Colorado Springs, Colorado said “Pain is a sign you’re investing well”
Although the pandemic is far from over, it is only a temporary fallback that we will eventually overcome. This is the perfect opportunity to add beaten-down stocks to your portfolio before the stock bounces back to an upward trend.
In order to identify the 15 best beaten-down stocks to buy now, we identified the 50 worst-performing stocks in the S&P 500 Index since the end of 2019 and sorted them by hedge fund sentiment scores.
Our in-house analysis shows that we can use the sentiment information gathered from the hedge fund filings to classify in advance a select group of stocks that can beat the S&P 500 index by double digits annually on average. For instance, the portfolio of our monthly newsletter’s stock picks has beaten the market by over 88 percentage points since March 2017 (see details here). Some of the portfolio holdings of our monthly newsletter have been shared publicly too. In October, we shared this real estate stock and since then, it’s been up nearly 50 percent.
Based on our hedge fund sentiment data, we now present to you the 15 best beaten-down stocks to buy now based on the stock picks of 800+ hedge funds tracked by Insider Monkey:
15. Boeing Company (NYSE:BA)
No of HFs: 43
Total Value of HF Holdings: $1.70 Billion
BA lost 37% in 2019 and ranks 15th in our list of best beaten-down stocks to buy now. The company is included in the 10 Best Defense Stocks to Buy for 2021 and 15 Most powerful Weapons in the World. An insider recently purchased 1,152 shares at around $173 in August 2020. The stock is up 18% since then. BA lost 37% since 2019.
In an article, we shared Miller Value Partners’ BA thesis:
“We’ve known Boeing for a long time. It’s always been a high quality company that’s traded for a premium valuation owing to its position as a global duopoly. We’d looked at it recently after weakness due to its highly publicized Max 737 issues, but it never got cheap enough for us to pull the trigger. After the pandemic, the stock went into freefall as its customer bases’ business dried up and people worried about its liquidity. The stock fell from $338 on February 19th when the S&P hit its high to a low of $89. We bought the stock after the new CEO Dave Calhoun said publicly that it would not take government capital if it required equity dilution because it had many other options. Our average price is just above $120 where it was trading for less than 7x what it earned in 2018. It will likely take a while to normalize to those earnings levels, but this business will survive and ultimately we will own a leader in a global duopoly. Even on depressed forecasts, the company currently has about a 10-15% free cash flow yield. If and when the economy normalizes, we think Boeing could be worth more than double its current price.”
14. Devon Energy Corporation (NYSE:DVN)
No of HFs: 44
Total Value of HF Holdings: $537 Million
DVN lost 20% since 2019 and ranks 14th in our list of best beaten-down stocks to buy now. The top hedge fund holder of this stock is Brandon Haley’s Holocene Advisors which had $53 million invested in the stock at the end of September. An insider purchased 10,000 shares at around $9 in March 2020. The stock is up 88% since then. DVN was mentioned in the 10 Best Dividend Stocks Under $20. Recently, the company announced the completion of the all stock-merger of equals with WPX Energy, the combined company will operate under the name Devon Energy and be headquartered in Oklahoma City. Dave Hager, executive chairman said,
“This transformational merger enhances the scale of our operations, builds a dominant position in the Delaware Basin and accelerates our cash-return business model that prioritizes free cash flow generation and the return of capital to shareholders. We are excited to combine our teams and we look forward to executing on our disciplined strategy to create value for all of our stakeholders.”
13. ConocoPhillips (NYSE:COP)
No of HFs: 45
Total Value of HF Holdings: $828 Million
COP lost 28% since 2019. The top hedge fund holder of this stock is Ken Fisher’s Fisher Asset Management which had $161 million invested in the stock at the end of September. An insider purchased 2,400 shares at around $41 in May 2020. The stock is up 2% since then. COP was mentioned in the 10 Best Oil Stocks to Buy Right Now and 10 Best Dividend Stocks to Buy According to Billionaire Ken Fisher. Just this year, COP reported that it has completed the acquisition of Concho Resources (CXO) with shareholders of both firms having approved the combination. ConocoPhillips Chairman and CEO Ryan Lance commented in a written statement
“We appreciate the strong support for this transaction from the shareholders of both companies, which we view as further affirmation of the significant benefits it will deliver. This acquisition results in the combination of two premier companies that can lead the structural change for our vital industry that’s critical to investors.”
12. Kinder Morgan (NYSE:KMI)
No of HFs: 46
Total Value of HF Holdings: $939 Million
KMI ranks 12th in our list of the best beaten down stocks to buy now. KMI lost 22% since 2019. The top hedge fund holder of this stock is Bob Peck and Andy Raab’s FPR Partners which had $221 million invested in the stock at the end of September. An insider purchased 7,000 shares at around $13 in August 2020. The stock is up 15% since then. The company was mentioned in the 12 Best MLP and Pipeline Stocks to Buy Now. The company recently announced the Permian Highway Pipeline (PHP) began full commercial in-services on January 1, 2021. Kinder Morgan Natural Gas Midstream President Sital Mody said,
“We are extremely pleased to have placed PHP in service. We are very proud of our team’s ability to execute and that we were able to complete this critical infrastructure project in the midst of a global pandemic. PHP will continue to provide environmental benefits and economic value to the State of Texas for many years to come. We believe that the Permian Basin will remain an important supply basin for decades, and our strong network of pipelines provides the ability to connect this supply to critical markets along the Gulf Coast.”
11. Concho Resources (NYSE:CXO)
No of HFs: 47
Total Value of HF Holdings: $731 Million
CXO lost 24% since 2019. The top hedge fund holder of this stock is D.E. Shaw’s DE Shaw which had $133 million invested in the stock at the end of September. COP recently acquired the stock, so it isn’t possible to invest in it anymore.
10. Las Vegas Sands (NYSE:LVS)
No of HFs: 47
Total Value of HF Holdings: $2.19 Billion
LVS lost 21% since 2019 and ranks 10th in our list of the best beaten down stocks to buy now. The company was mentioned in the 10 Best Mid-Cap Stocks to Buy According to Billionaire Brain Higgins. They are known for their world-class resorts that feature luxury hotels. During the third quarter of 2020, the company reported net revenue of $586 million, a decrease of 82.0% from the prior-year quarter.
9. Under Armour (NYSE:UAA)
No of HFs: 48
Total Value of HF Holdings: $846 Million
UAA ranks 9th in our list of the best beaten down stocks to buy now. UAA lost 19% since 2019. The company is known for its innovative sportswear, shoes, and accessories. UAA and Southampton FC have mutually agreed to end their partnership two years before the deal was set to expire. In a statement by Southampton FC they mentioned,
“Under Armour and Southampton FC have valued the relationship over the last four years and will continue to celebrate the on and off-pitch accomplishments shared together. The club thanks Under Armour for being a great partner and wishes them continued success in their future endeavors.”
8. AT&T Inc. (NYSE:T)
No of HFs: 51
Total Value of HF Holdings: $1.15 Billion
T lost 19% since 2019 and ranks 8th on our list of best beaten-down stocks to buy now. An insider recently purchased 100,000 shares at $29 in July 2020. The stock is down 1% since then. T was mentioned in the 11 Biggest Telecom Companies in the World. Distillate Capital made a few comments on the stock in their Q1 2020 investor letter,
“The largest new positions are Facebook (FB) and AT&T (T). In each case, their shares underperformed the market while normalized forward free cash flow estimates held up better than those of the market overall, such that relative valuations became more attractive.”
7. Exxon Mobil Corporation (NYSE:XOM)
No of HFs: 52
Total Value of HF Holdings: $1.38 Billion
Exxon Mobil ranks 7th in our list of the best beaten down stocks to buy now. XOM lost 26% since 2019. The top hedge fund holder of this stock is Jean-Marie Eveillard’s First Eagle Investment Management which had $905 million invested in the stock at the end of September. An insider recently purchased 30,000 shares at around $33 in March 2020. The stock is up 42% since then. XOM was mentioned in the 10 Best Oil Stocks to Buy Right Now. In an article, First Eagle Investment Management made some comments on XOM in their Q3 2020 investor letter.
“The stock of Exxon Mobil continued to struggle in the third quarter, and it lost roughly half its market cap year to date. Despite this, we believed Exxon Mobil was well-equipped to contend with lower prices and remained a compelling investment. The company demonstrated high levels of operational flexibility during the difficult market environment and maintained an upward drift in earnings power. Its high-quality, long-duration assets occupy attractive positions on the cost curve.”
6. Schlumberger Limited (NYSE:SLB)
No of HFs: 53
Total Value of HF Holdings: $1.03 Billion
SLB lost 36% since 2019. The top hedge fund holder of this stock is Jean-Marie Eveillard’s First Eagle Investment Management which had $491 million invested in the stock at the end of September. An insider purchased 25,000 shares at around $17 in September 2020. The stock is up 41% since then. First Eagle Management mentioned a few of their comments in the stock in their Q3 2020 investor letter.
“Oilfield services giant Schlumberger struggled to gain traction following the initial pandemic-related selloff of the first quarter. The company has been aggressive in cutting costs in response to the difficult operating environment; it has slashed about 25% of its workforce, reduced its dividend and sold off assets, including its North American hydraulic fracking business. We see Schlumberger’s financial strength and dominant market position as sources of resilience that may potentially enable it to respond positively if and when oil prices rebound.”
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Disclosure: None. 10 Best Beaten Down Stocks To Buy Now is originally published at Insider Monkey.
