In this article, we discuss the 7 worst beaten down stocks to invest in.
The US stock market remains resilient, with the upward momentum intact at the start of the year’s final quarter. The rally to record highs has come against the backdrop of investors betting on themes like artificial intelligence and interest rate cuts on the back of impressive earnings results.
Nevertheless, the recent market boom has raised concerns regarding possible market overvaluation. The market has seen substantial gains, with the S&P 500 up by more than 20% and flirting with record highs. Overvaluation bells are increasingly ringing, given that the Bull Run persisted despite interest rates at record highs.
READ ALSO: 8 Best Warren Buffett Stocks to Buy According to Analysts and 8 Best Value Stocks to Invest In According To Warren Buffett.
The US Federal Reserve cutting interest rates by 50 basis points has since acted as the latest catalyst sustaining the upward trajectory in the market. The spike results from several things, such as rising investor confidence and optimism regarding the economy’s future as the Fed moves to bring interest rates down.
The Federal Reserve’s move to reduce interest rates by half a percentage point in September had a significant effect on the market. The move, driven by worries about the condition of the job market and slowing manufacturing, also raised serious doubts about the health of the US economy. Although some experts think a reduction of half a percentage point is too extreme, others believe it could be the much-needed boost for some of the worst beaten-down stocks to invest in.
Given that the market always tends to rise with a perfect record of 7 out of the 7 times such cuts have occurred, it underscores why investors should be bullish about some of the worst-beaten stocks to invest in. According to Vance Howard of Howard Capital Management, there is an 83% chance of upward movement as the Fed continues to trim interest rates.
Some of the sectors Vance Howard believes are well poised to benefit from the low interest rate environment include real estate and utilities under pressure before the Fed cut. Regarding particular industries to watch, Howard pointed out that financials would probably get stronger after rate cuts. He clarified that although financial stocks usually bounce back and keep rising following a rate cut, they may initially decline. He also advised sticking with technology stock investments.
While a lower interest rate environment could be a boon for some beaten-down stocks, investors should be extremely cautious given the prevailing economic conditions. It’s essential to look at the overall market movements and possible dangers.
Looking forward to the final three months of the year, veteran investor and the CEO of Wise Private Singapore, Kevin Tang, has warned about the potential impact of multiple uncertainties on the horizon. The forthcoming U.S. elections, increasing geopolitical tensions, and worries about an economic downturn are headwinds investors believe could weigh heavily on the market, even on the interest rate cuts that provide support.
Moreover, the forthcoming US elections are making analysts and economists jittery as the market becomes more unstable, given the two candidates’ economic policies. Tom Lee, the managing partner and chief research officer at Fundstrat Global Advisors, recently shared his views on CNBC, suggesting that investing in small-cap stocks and equities is preferable to bonds for their higher growth potential, provided the election uncertainty continues.
Meanwhile, analysts at Morgan Stanley believe that Chinese stocks could experience a more sustained rally following the recent wave of stimulus measures. They anticipate a rally of at least 10% in the near future and possibly even more. If there is further clarity on earnings improvements, the stocks could rally even further, with valuations reaching levels last seen during the economy’s reopening from November 2022 to March 2023.
Source: Pexels
Our Methodology
To make our list of the best beaten-down stocks, we first made a list of all stocks that have set a new 52-week low and have a market capitalization of more than $300 million. Then, we also considered their year-to-date share price performance. Finally, this list of beaten-down stocks was ranked in descending order of the number of hedge funds that had bought the shares in Q2 2024, and the least popular stocks according to hedge funds were chosen.
Why are we interested in 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).
Worst Beaten Down Stocks to Invest In
7. Occidental Petroleum Corporation (NYSE:OXY)
Current share price: $51.54
52 Week Range: $49.75 – $71.19
Year to date Gain as of October 1: -14.88%
Number of Hedge Fund Holders: 62
Occidental Petroleum Corporation (NYSE:OXY) is a heavyweight energy company that has acquired exploration and is developing oil and gas properties. It is one of the worst beaten-down stocks to invest in, and it has taken a significant hit on oil prices, tumbling amid its premier position in the Permian basin, which acts as a source of cheap oil.
It is one of the stocks cherished by legendary investor Warren Buffett owing to its track record in generating solid results and free cash flow regardless of developments in the energy sector. Consequently, the company has consistently rewarded investors with dividends and buybacks as part of its commitment to returning value.
Occidental Petroleum Corporation (NYSE:OXY) holds approximately 2.8 million net acres of land in the Permian Basin, making it one of the major producers in the region. Its acquisition of CrownRock for $12 billion strengthens its position in the region and access to cheap oil.
Following the acquisition, management projects that its annualized cash flow could rise by as much as $260 million for every $1 increase in crude oil prices per barrel. This implies that an increase in oil prices of $4 per barrel could generate over $1 billion in additional cash flow, which is an amazing accomplishment given that its free cash flow over the previous 12 months was only $6 billion.
Additionally, the acquisition strengthened the company’s ability to produce oil at a breakeven of below $40 a barrel. Consequently, with oil prices at about $70 a barrel, Occidental Petroleum Corporation (NYSE:OXY) is well-positioned to remain profitable and generate free cash flow to return to shareholders.
Additionally, Occidental Petroleum boasts a profitable chemical and midstream business that generates free cash flow regardless of the prevailing market condition. While the stock has been under pressure for the better part of the year, it remains an attractive prospect at a discounted valuation with a price-to-earnings multiple of 11. The company continues to distribute a healthy dividend that yields about 1.71%.
By the end of Q2 2024, the number of hedge funds with stakes in Occidental Petroleum Corporation (NYSE:OXY) increased to 62, up from 61 in the previous quarter. The combined value of these stakes surpassed $18.52 billion, reflecting a growing interest and confidence in the company’s performance among hedge fund investors.
6. BP p.l.c. (NYSE:BP)
Current share price: $31.90
52 Week Range: $30.52 – $40.84
Year to date Gain as of October 1: -11.24%
Number of Hedge Fund Holders: 38
BP p.l.c. (NYSE:BP) is an integrated energy company that engages in the exploration and production of oil and gas. Nevertheless, the British company has been under pressure in 2024, plunging close to its 52-week lows.
Concerned by the underperformance, management has announced plans to sell the struggling onshore wind business in the US as they scale back exposure to renewables and focus on the core business. It also plans to offload part of its key natural gas pipeline in New York in a deal valued at $1 billion.
The proposed divestments show the difficulties BP p.l.c. (NYSE:BP) faces in luring investors. Even as the company continues to divest struggling assets in the US, it has set sights on the Indian market, billed as the third largest in oil consumption. The company plans to expand its footprint in the country for growth opportunities.
In addition, BP p.l.c. (NYSE:BP) revealed impressive financial results for the second quarter of 2024, including an operating cash flow of $8.1 billion and a $1.4 billion decrease in net debt to $22.6 billion. These latest events demonstrate BP’s continued involvement in the global energy market as well as its strategic choices.
Even though it has more debt than some of its competitors in the industry, the company has pledged to increase dividends and repurchase billions of shares this year. The company, which derives most of its revenue from fossil fuels, is attempting to manage a decline in oil prices in the face of weak demand.
BP p.l.c. (NYSE:BP) boasts of an impressive record in dividend payments, having maintained them for 33 consecutive years, and currently offers an attractive dividend yield of 6.12%
According to Insider Monkey’s Q2 2024 database, 38 hedge funds held stakes in BP p.l.c. (NYSE:BP), a slight decrease from 40 in the previous quarter. The combined value of these stakes exceeded $1.48 billion. This indicates a strong, albeit slightly reduced, interest from hedge funds in BP’s stock during this period.
5. Acadia Healthcare Company, Inc. (NASDAQ:ACHC)
Current share price: $63.41
52 Week Range: $53.22 – $87.77
Year to date Gain as of October 1: -18.94%
Number of Hedge Fund Holders: 35
Acadia Healthcare Company, Inc. (NASDAQ:ACHC) is a healthcare company that provides behavioural healthcare services. It also develops and operates acute inpatient psychiatric facilities, speciality treatment facilities comprising residential recovery facilities and eating disorder facilities.
The stock has been under pressure, plunging close to its 52-week lows following reports Federal authorities were investigating it over its admissions, length of stay and billing practices. Acadia Healthcare Company, Inc. (NASDAQ:ACHC) has already refuted any wrongdoing, insisting that decisions on patient care are not business decisions and are not influenced by insurance coverage or patients’ ability to pay.
The company fires from all angles amid the federal probe, delivering solid second-quarter results. Revenue increased by 8.8% to $796 million in the company’s Q2 2024 earnings, while adjusted EBITDA increased by 7.6% year over year. Acadia Healthcare Company, Inc. (NASDAQ:ACHC) plans to add about 1,200 beds and expects strong volume growth and mid-single-digit same-store patient day growth in the year’s second half despite the closure of two underperforming facilities.
To improve safety and care coordination, the company has also standardized clinical protocols, launched new training initiatives, and spent about $100 million on technology. Acadia Healthcare Company, Inc. (NASDAQ:ACHC) claims that these efforts are yielding encouraging outcomes, as evidenced by rises in patient satisfaction ratings and excellent evaluations for their opioid treatment programs. These are a few of Acadia Healthcare’s latest innovations.
Acadia Healthcare Company, Inc. (NASDAQ:ACHC) is one of the worst-beaten stocks to invest in as its business model has proved resilient, as evidenced by 10% revenue growth over the past 12 months. Alongside this growth, EBITDA grew strongly over the same time period by 12.69%, indicating increased operational efficiency. Additionally, 35 hedge funds held stakes in the company at the end of the second quarter of 2024.
4. PBF Energy Inc. (NYSE:PBF)
Current share price: $30.95
52 Week Range: $30.58 – $62.88
Year to date Gain as of October 1: – 28.21%
Number of Hedge Fund Holders: 32
PBF Energy Inc. (NYSE:PBF) is an energy company that engages in refining and supply of petroleum products. It produces gasoline, ultra-low-sulfur diesel, heating oil, diesel fuel, jet fuel, lubricants, petrochemicals, and asphalt.
Unfavourable market conditions, like declining RIN, adjusted crack spreads, and prolonged maintenance activities impacted the company’s Q2 earnings. PBF Energy Inc. (NYSE:PBF) delivered a loss from operations of $74.6 million compared to an income of $1.3 billion it delivered last year in the same quarter. Quarterly revenues declined to $8.74 billion from $9.16 billion in the prior year quarter but were above the consensus estimate of $8.72 billion.
Nevertheless, PBF Energy Inc. (NYSE:PBF) maintained a healthy cash balance sheet in spite of these difficulties, aiming to keep it between $1 billion and $1.5 billion. Despite the disappointing Q2 results, PBF Energy remains upbeat about the future.
By the end of the year, PBF Energy Inc. (NYSE:PBF) intends to double its output from the Trans Mountain Expansion pipeline, and it anticipates increased demand in the second half of the year. Additionally, the company has reiterated its commitment to continue returning value to shareholders through dividends and repurchases. Consequently, it confirmed a $0.25 a share dividend payable throughout various market conditions. The stock also yields 3.23%, which is ideal for income-focused investors.
In the second quarter of 2024, 32 out of the 912 hedge funds tracked by Insider Monkey’s database purchased shares of PBF Energy Inc. (NYSE:PBF). The largest investment came from John Over deck and David Siegel’s Two Sigma Advisors, which invested $75.85 million in the company.
3. Patterson-UTI Energy, Inc. (NASDAQ:PTEN)
Current share price: $7.65
52 Week Range: $7.45 – $14.26
Year to date Gain as of October 1: – 28.87%
Number of Hedge Fund Holders: 32
Patterson-UTI Energy, Inc. (NASDAQ:PTEN), through its subsidiaries, engages in the provision of contract drilling services to oil and natural gas operators. Its contract Drilling Services segment provides contract and directional drilling services in onshore oil and natural gas basins.
The company has been under pressure due to high interest rates and inflation, forcing most oil and gas companies to trim their capital expenditure on new projects. However, with the Federal Reserve cutting interest rates, the oilfield services sector should see an uptick in activities.
In Q2 2024, the company reported $1.348 billion in total revenue, $11 million in net income, and $324 million in adjusted EBITDA. In contrast to earlier estimates of a slight improvement, it predicts a slight decline in third-quarter gross profit for Completion Services. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) also revealed a decrease in capital spending for 2024; from a previous estimate of less than $740 million, the company now plans to spend $700 million.
Patterson-UTI Energy, Inc. (NASDAQ:PTEN) has made some major moves recently to strengthen its long-term prospects and growth metrics, one of which is its strategic alliance with ADNOC Drilling. PTEN will provide drilling and completion experience in the Middle East through a minority equity interest in Turn Well.
The partnership presents the company with a cost-effective means of leveraging the region’s non-traditional multi-year growth prospects. This strategic shift is especially significant because it enables Patterson-UTI Energy, Inc. (NASDAQ:PTEN) to expand its geographic reach outside its primary North American market. The expansion into the Middle East may offer protection against the volatility of the US land market and create new growth opportunities.
While trading at a price-to-earnings multiple of 7, which is a substantial discount compared to its peers, Patterson-UTI Energy, Inc. (NASDAQ:PTEN) rewards investors with a 4.18% dividend yield. By the end of Q2 2024, 32 hedge funds had collectively invested $395 million in Patterson-UTI Energy, Inc. (NASDAQ:PTEN), according to Insider Monkey’s database.
2. HF Sinclair (NYSE:DINO)
Current share price: $44.57
52 Week Range: $44.07 – $64.16
Year to date Gain as of October 1: – 20.21%
Number of Hedge Fund Holders: 30
HF Sinclair Corporation (NYSE:DINO) is an independent energy company that produces and markets gasoline, diesel fuel, jet fuel, and renewable diesel and speciality lubricant products. The company has felt the full brunt of the energy sector coming under pressure amid a slowing global economy.
Wider economic factors and volatile gasoline margins continue to pressure the refining sector. These market dynamics significantly impact how well businesses like HF Sinclair Corporation (NYSE:DINO) perform, consequently affecting their performance.
While the company has been under pressure owing to the overall energy sector struggling amid the high interest rates environment, it delivered solid second-quarter results. Earnings totalled $0.78 a share in the second quarter, above the $0.72 that analysts expected. Revenues were also up at $7.85 billion, better than the expected $7.83 billion.
HollyFrontier has become a fully integrated energy company after its acquisition of Sinclair Oil. With the addition of the recently acquired Puget Sound refinery, its refining footprint has expanded significantly to seven facilities. The acquisitions also expanded its reach to the West Coast, entering a more challenging refining market with fewer competitive advantages beyond its historical roots in the mid-continent and the Rockies.
Nonetheless, given the region’s expanding biofuel mandates, the foothold on the West Coast should aid with the expanding renewable diesel business. By adding a production facility and pretreatment project, the Sinclair acquisition expands HF Sinclair Corporation (NYSE:DINO)’s efforts towards renewable energy.
Although the company’s wide range of operations offers some protection from industry-specific difficulties, macroeconomic variables and industry trends still impact its overall performance. Nevertheless, HF Sinclair Corporation (NYSE:DINO) remains in a solid financial position, as evidenced by its 4.49% dividend yield, which affirms why it is one of the worst beaten-down stocks to invest in for passive income—additionally, the stock trades at a discount with a price-to-earnings multiple of 8.
1. Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX)
Current share price: $98.71
52 Week Range: $98.58 – $143.43
Year to date Gain as of October 1: -23.24%
Number of Hedge Fund Holders: 26
Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) operates as a bottler of Coca-Cola trademark beverages. It produces, markets, and distributes Coca-Cola’s trademark beverages in Latin America. It also operates small-box retail chain stores under the OXXO name and retail service stations for fuels, motor oils, lubricants, and car care products under the OXXO GAS name.
The company has felt the full effects of the Mexican Peso depreciating, significantly affecting its returns. The uncertainty over the Mexican presidential election also had a hand in the stock imploding, a situation exacerbated following the exit of the respected chief financial officer.
Amid the headwinds, Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) has continued to fire from all angles regarding operational efficiency. Femsa’s Oxxo stores boast the highest margins of any convenience store operator worldwide, at 10%. Furthermore, given that Oxxo has a growing financial-technology component, Femsa would not necessarily face the same obstacles as other companies from an uneven economic outlook for the region, even though investors may be concerned about it.
Additionally, Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) has been selling non-essential businesses to fund its bottling business, which is growing steadily and steadily and enabling the company to continue paying dividends and buybacks to its shareholders. The real story, though, is its convenience store business, which is expected to grow throughout Central and South America, possibly even Texas.
Amid the underlying growth and operational efficiencies, Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX), still trades at a discount with a price-to-earnings multiple of 6 while offering a 2.15% dividend yield.
By the end of Q2 2024, 26 hedge funds held shares of Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX), according to Insider Monkey’s database. The largest stake was held by First Eagle Investment Management, which owned approximately 9.58 million shares valued at around $1.03 billion.
The worst beaten-down stocks to invest in are companies languishing near 52 week lows but with significant upside potential as overall economic conditions improve on lower interest rates. However, given that the artificial intelligence arms race is just but starting, there are under-the-radar AI stocks trading at highly discounted valuations that hold greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than FMX, check out our report about the cheapest AI stock.
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