In this article, we will analyze the list of 18 best 52-week low stocks to buy now according to short sellers.
Buying low and selling high is a popular investment strategy that value investors inspired by Warren Buffett have perfected over the years. The legendary investor has consistently emphasized the importance of identifying stocks of undervalued companies with significant growth prospects and holding onto these investments for an extended period.
Some of the most undervalued stocks to buy are those trading near their 52-week lows, backed by solid underlying fundamentals. A lot of these companies have durable competitive advantages but have fallen due to an overreaction by pessimists to short-term headwinds. The companies should boost strong brands in their respective fields with high barriers to entry.
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Value investing means paying attention to more than just the stock price but by focusing on valuation. A pullback often creates buying opportunities where quality companies become available at low price-to-earnings multiples or low price-to-sales ratios relative to their industries.
Over the past 20 years, 95% of investment firms have failed to beat the S&P 500. In contrast, Buffett has averaged an annual return of 20%, nearly double the S&P 500 over the same period.
With the S&P 500 up by about 20% for the year, most stocks are trading at premium valuations above their 52-week highs. The impressive gains have come amid unfavorable market conditions, with interest rates near all-time highs of between 5.25% and 5.50%.
On the other hand, some stocks have pulled back significantly and are currently trading close to the 52-week lows, their core business hurt by the high interest rate environment. Additionally, some of the stocks have underperformed due to deteriorating macroeconomics. Concerns that the U.S. economy could plunge into recession have always hurt some of the stock’s sentiments. The U.S. Federal Reserve is expected to cut interest rates in September and these stocks might not be near their lows for long.
According to Stuart Keiser, Citi head of equity trading strategy, the high interest rate environment has left the market in a very unstable situation amid a “ tricky environment.” Likewise many investors are on edge as to whether there will be a soft or hard landing. Keiser said, in an interview on CNBC’s Fast Money:
“Basically you had a 12 to 18 month period of positive economic surprise of what I would call higher for longer growth strong rate cuts getting pushed out. Markets were able to deal with that because growth was really positive. Since late June economic data surprised negative, economic data momentum negative. The market is now trading instead of higher for longer trading, a bit of growth slowdown. That’s why you are getting this schizophrenia because as growth decelerates you get into a borderline at which the risk becomes really big that you could go hard landing instead of soft landing. So our view is that the risk reward is not what it was a couple of months back”
Amid the market outlook uncertainty, focusing on stocks near the 52-week lows is a sure way of balancing the risk reward amid the premium valuation in play. While the focus has been on artificial intelligence investment plays, stocks in various sectors are trading at discounted valuations and are sure to offer significant returns.
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Our Methodology
To compile the list of the best 52-week low stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week lows (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order of their short interest.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. 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).
Best 52-Week Low Stocks to Buy Now According to Short Sellers
18. PBF Energy Inc. (NYSE:PBF)
52 Week Range: $32.64 – $62.88
Current Share Price: $32.72
Number of Hedge Fund Holders: 32
Short interest rate: 8.17%
PBF Energy Inc. (NYSE:PBF) is an energy company that refines and supplies petroleum products. Its product line includes gasoline ultra-low sulfur diesel jet fuel, among other products. The stock is barely up by 1% from its 52-week low, an underperformance that comes amid solid underlying fundamentals.
For starters, PBF Energy Inc. (NYSE:PBF) continues to generate significant revenues, with oil prices trading above $75 a barrel. The company is benefiting from improving margins in the refining business.
Margins for refining have returned to more stable levels after reaching extreme highs in early 2023, following the disruption caused by Russia’s invasion of Ukraine, which significantly affected the markets for these products.
PBF Energy Inc. (NYSE:PBF) reported a combination of outcomes for the second quarter of 2024, with its profits affected by falling RIN-adjusted crack spreads, weak demand for co-products, and prolonged maintenance tasks. However, the company successfully kept a strong cash position, aiming for a cash balance between $1 billion and $1.5 billion.
PBF Energy Inc. (NYSE:PBF) also reiterated its dedication to its investors, emphasizing its focus on long-term value creation through share buybacks and dividend payments.
The firm’s assets on the East Coast are strategically placed to tackle supply shortages, while those on the West Coast continue to hold their competitive edge. PBF Energy is set to increase its output from the Trans Mountain Expansion pipeline by the year’s end, signaling a favorable perspective for its future endeavors.
Even though a $100 million chance for profit was missed due to prolonged downtime at Del City and Toledo and an extra $50 million due to a downturn in the market, PBF Energy Inc. (NYSE:PBF) maintains a hopeful stance for what lies ahead. The firm anticipates a rise in demand in the latter half of the year and is confident about the prospects for its renewable diesel division in the coming years.
Amid the improving operational efficiency and financial performance, PBF Energy is currently trading at a price-to-earnings multiple of 20 while offering an annual dividend of 2.92%. The amount of outstanding shares short as of July stood at 8.17%.
During 2024’s second quarter, 32 out of the 912 hedge funds part of Insider Monkey’s database had bought PBF Energy Inc. (NYSE:PBF)’s shares. John Overdeck and David Siegel’s Two Sigma Advisors was the biggest investor, courtesy of its $75.85 million investment.
17. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
52 Week Range: $9.38 – $10.37
Current Share Price: $9.45
Number of Hedge Fund Holders: 35
Short interest rate: 7.68%
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) provides healthcare, pharmacy, and retail services. Its U.S. Retail Pharmacy division runs drugstores, health and wellness, specialty, and home delivery pharmacy services, including health and fitness, beauty, personal care, and everyday items. The International division sells prescription drugs and various consumer goods outside the U.S.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has been under pressure over the past year owing to growing concerns over its pharmacy business. The primary challenge Walgreens needs to grapple with is the low reimbursement rates it receives for drugs from pharmacy benefit managers (PBMs). Over the last ten years, PBMs have exerted significant pressure on drugstores, including Walgreens, reducing profit margins over time.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is currently negotiating with pharmaceutical manufacturers and insurance companies to adopt a pricing strategy known as cost-plus, which would allow it to receive payments proportional to its services. In the long term, reducing the financial strain on pharmacies will be necessary, leading to the exploration of alternative pricing strategies. It’s important to note that pushing pharmacies out of operation would ultimately harm all parties involved.
Additionally, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) made a questionable investment when it acquired a majority stake in VillageMD and aided its expansion by acquiring Summit Medical. The owner of primary care medical clinics struggled to grow beyond its established geographic area. Walgreens has been considering various strategies for VillageMD, including possibly selling the entire company.
Regarding its main pharmacy operations, the firm has initiated the process of closing down stores that need to generate more profit throughout the nation. This decision is beneficial for multiple reasons. Firstly, it will lower expenses by decreasing the number of stores and reducing overhead costs. Secondly, although it will decrease revenue, it is expected to maintain significant sales as customers shift their patronage to other local establishments. This is anticipated to enhance in-store sales and profit margins as it manages increased foot traffic with a more economical cost base.
Barely 1% above its 52-week low, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is trading at a significant discount with a price-to-earnings multiple of 4 compared to an average P/E of 34 for healthcare stocks. Additionally, as of the end of July, the percentage of outstanding shares stood at 7.68%.
The number of hedge funds tracked by Insider Monkey holding stakes in Walgreens Boots Alliance, Inc. (NASDAQ:WBA) fell to 35 at the end of June, from 41 a quarter earlier.
Here is what Ariel Investments said about Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q1 2024 investor letter:
“Alternatively, several positions weighed on performance. Shares of retail drugstore operator, Walgreens Boots Alliance, Inc. (NASDAQ:WBA), declined over the period as challenging consumer and macroeconomic conditions, ongoing operational issues and a significant cut in the dividend weighed on shares. To address these performance lows, WBA’s new CEO is rebuilding the company’s management team with leaders who have significant experience in healthcare services. Meanwhile, WBA continues to execute on its cost savings initiatives to optimize profitability and is using excess capital to prioritize the sustainability of its operations and balance sheet. Over the medium-term, we expect a re-rating in shares as the new executive team earns credibility, margins and free cash flow show signs of improvement and the company deleverages. WBA shares are currently trading at a significant discount to our estimate of private market value.”
16. Noble Corporation (NYSE:NE)
52 Week Range: $36.38 – $55.34
Current Share Price: $37.92
Number of Hedge Fund Holders: 38
Short interest rate: 7.41%
Noble Corporation (NYSE:NE) is a global offshore drilling contractor for the petroleum and natural gas sector. It offers drilling services contractually to the petroleum and natural gas sector via its network of mobile offshore drilling platforms.
While Noble Corporation (NYSE:NE) has lagged the overall market, it has continued to fire on all angles on operational efficiency. Its revenues have increased from $847 million to $2.6 billion over the last three years.
The robust growth has come amid higher contract drilling revenues. The company boasts of a drilling backlog of over $4 billion. Its revenue in the second quarter was up 8.5% year over year, driven by higher reimbursable. Additionally, its EBITDA margin improved from 29% to 39% due to lower interest expenses.
In June, Noble Corporation (NYSE:NE) moved to bolster its push to deliver superior innovation and value as a leading offshore operator with the acquisition of Diamond Offshore Drilling.
“Our position will be strengthened with the addition of four 7th generation drillships and one of the most high-spec harsh environment semi-submersible rigs in the world. Additionally, Diamond’s five conventional deep-water and midwinter rigs have averaged above 85% utilization over the last 3 years and currently have strong forward contract coverage. Supported by Diamond’s $2.1 billion of backlog and $100 million of anticipated cost synergies, we expect the transaction to be immediately accretive to our free cash flow per share and contribute to accelerated growth in our return of capital to shareholders,” said Robert Eifler.
Noble Corporation (NYSE:NE) is one of the best 52-week low stocks to buy now, according to short sellers, while trading at a price-to-earnings multiple of 9 and offering a dividend yield of 5.27%, ideal for income-focused investors. The percentage of its outstanding shares is 7.41%.
During Q2 2024, 38 out of the 912 hedge funds profiled by Insider Monkey held a stake in Noble Corporation (NYSE:NE).
