We recently compiled a list of the 10 Blue-Chip Stocks to Buy at 52-Week Lows. In this article, we are going to take a look at where United Parcel Service, Inc. (NYSE:UPS) stands against the other Blue-Chip Stocks to Buy.
Despite the stock market indices hitting record highs this year, some stocks edged lower and are currently languishing near their 52-week lows. While it’s common practice to stay clear of stocks under pressure, it could sometimes be a costly error. When the shares of solid companies become unpopular due to macroeconomic factors and concerns, it presents a buying chance that value investors seize.
Deteriorating macroeconomics was the catalyst behind some blue chip stocks imploding in a year when the overall market traded higher. As the high interest rate environment helped push inflation close to the recommended 2%, some companies felt the blunt even as the S&P 500 rallied up to 17%.
READ ALSO: 8 Best Warren Buffett Stocks to Buy According to Analysts and 8 Best Value Stocks to Invest In According To Warren Buffett.
Companies whose core business depend on consumer purchasing power were the hardest hit as consumers became cautious amid the high inflation and liquidity pressures. Likewise, as the U.S. economy came under pressure amid the high interest rates depicted by a struggling U.S. labor market and manufacturing sector, investors shunned stocks in the consumer cyclical and energy sectors susceptible to deteriorating economic conditions.
Fast forward, the Fed swinging into action and initiating a 50 basis points interest rate cut to try and prevent the U.S. economy from plunging into recession has presented a new lease of life in the markets. According to market bull and head of research at Fundstrat Global Advisors Tom Lee, the Federal Reserve cutting cycle has the potential to set up the market for a strong rally heading into year-end.
Large-cap stocks, hard-hit by high interest, increasingly present undiscovered investment opportunities in a volatile market. Even though a stock that is at or close to a recent low may seem like a risky investment, large-cap stocks frequently reflect market sentiment rather than underlying problems.
With the overall market remaining bullish as interest rates around the globe drop, professional investors are increasingly taking note of the best blue-chip stocks to buy at 52-week lows. Astute investors know these large-cap stocks’ current valuations might not accurately represent their long-term potential, as most appear to be trading at a discount.
According to Canaccord Genuity analyst Michael Welch, the fourth quarter presents one of the best opportunities to buy undervalued stocks, as it is usually the strongest quarter for stocks. The fact that the quarter often ends positively in three of every four years underscores why investors should be bullish about blue-chip stocks that have pulled back significantly and are showing signs of bouncing back.
According to Welch, now is not the time to fight the Fed or the tape as the market shows signs of edging higher. The analyst believes now is the time to position one’s portfolio for a potential fourth-quarter rally. Investors have a unique opportunity to secure higher dividend yields and long-term capital gains when the market recovers and high-quality stocks bottom out after the recent slump.
Nevertheless, Lee of Fundstrat Global Advisors believes investors should be cautious as the uncertainty around the U.S. presidential election could turn out to be a significant headwind. The uncertainty around former president Donald Trump and Kamala Harris’s economic platforms should make the markets weary and curtail significant gains.
Our Methodology
To make our list of blue chip stocks at 52-week lows, we ranked large-cap firms trading on the NYSE and NASDAQ whose shares are trading at new 52-week lows or are at most 0-10% higher. The blue-chip stocks at 52-week lows with the highest market capitalization were selected, and their share prices are also mentioned. Finally, we ranked the stocks in descending order based on market cap.
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).
United Parcel Service, Inc. (NYSE:UPS)
52 Week Range: $123.12 – $163.82
Current Share Price: $134.26
Number of Hedge Fund Holders: 44
Market Capitalization as of September 30: $115 Billion
United Parcel Service, Inc. (NYSE:UPS) is a shipping magnate that engages in the transportation, delivery, and distribution of express letters, documents, small packages, and palletized freight. Shares of the shipping company have plunged significantly close to 52-week lows, attributed to disappointing quarterly performance and weak guidance.
United Parcel Service, Inc. (NYSE:UPS)’s underperformance can be attributed to economic challenges, such as supply chain disruptions and consumer demand changes, affecting the global shipping and logistics industries.
Revenue in the second quarter was down by about 1% to $21.8 billion, missing consensus estimates of $22.18 billion. On the other hand, profits fell 32% to $1.41 billion compared to $2.08 billion delivered in the same period last year. The stock also took a hit on management, narrowing the revenue outlook to $93 billion from a previous guidance of between $92 billion and $94.5 billion.
Amid the disappointing quarterly results and guidance, U.P.S. returning to growth in terms of shipping volume for the first time in nine quarters suggests normalization from the pandemic highs. Additionally, United Parcel Service, Inc. (NYSE:UPS) is one of the blue-chip stocks to buy at 52-week lows as it is well poised to benefit from the lower interest rate environment.
The Fed cutting interest rates by 50 basis points should significantly impact consumer purchasing power, allowing United Parcel Service, Inc. (NYSE:UPS) to enjoy increased shipping volumes and generate more revenues.
At 8.24%, United Parcel Service, Inc. (NYSE:UPS)’s operating margin is increasing. In addition, the company’s strong dividend yield of 4.86% is close to its peak of the last ten years. Because of this, UPS is a desirable choice for income-focused investors. The company has also announced plans to return $500 million to shareholders heading into year-end as part of its buyback plan.
At the end of Q2 2024, 44 hedge funds reported holding stakes in United Parcel Service, Inc. (NYSE:UPS), with a total value of $1.31 billion. As of June 30, Citadel Investment Group was the largest stockholder, with a stake valued at $403.7 million.
Artisan Partners’ Artisan Value Fund stated the following regarding United Parcel Service, Inc. (NYSE:UPS) in its first quarter 2024 investor letter:
“United Parcel Service, Inc. (NYSE: U.P.S.) was a Q4 2023 purchase. When we initiated our position, shares were under pressure due to concerns about its new labor contract diverting volumes and driving up costs, as well as the continued normalization of volumes following COVID-related gains. The stock moved higher after we purchased it but gave up those gains in January when the company reported weaker-than-expected shipping volumes and a decline in revenue in the prior quarter. Despite the long-term growth tailwinds from the secular shift toward e-commerce, the shipping business is still cyclical, so disappointments will happen. However, we welcomed the market’s short-term focus as it provided us an opportunity to purchase U.P.S. at an undemanding valuation of less than 11X our view of normalized earnings. U.P.S. is a good transport operation that easily earns its cost of capital, generates significant free cash, has a wide economic moat, has a strong financial profile and pays an attractive dividend yielding 4%. With the new 5-year labor agreement completed, we believe U.P.S. can focus on regaining lost volume and improving its cost structure.”
Overall UPS ranks 7th on our list of 10 Blue-Chip Stocks to Buy at 52-Week Lows. While we acknowledge the potential of UPS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UPS, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
