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All Contents © 2017The Kiplinger Washington Editors
By Chris Katje
| June 2017
One of the most popular screeners for stocks to buy is looking at companies trading at 52-week lows. This is a common practice that echoes the well-known phrase of “buy low, sell high”. Ultimately, if investors can time buying stocks at their bottoms, there should be gains to follow. While that is not always the case, many large-cap stocks can be picked up on sale at 52-week lows due to a number of reasons, including weak earnings or guidance, or performance of peers.
here are three stocks to buy that are trading near their 52-week lows. The three stocks come from different sectors and come with different reasons to buy. Each of these stocks has seen its shares fall despite a strong reason to be optimistic.
With that in mind, take a look at these battered stocks to buy because they should have strong second halves in 2017.
Prices and data are from the original InvestorPlace story published on June 26, 2017. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
Among the top-battered stocks are retail stocks; however, not all of them present opportunities worthy of risk-taking. But Macy’s, Inc. (M) — one of the world’s largest apparel retailers — is a stock worth looking at.
Shares of M are down more than 35% in 2017, but it’s important to remember that Macy's is still recognized as a top brand and sees strong traffic. Around 50% of Americans shop at Macy’s at least once a year. The company’s website sees 1.5 billion visits each year. Macy’s holds a top two market share position in categories like ready-to-wear, women’s dresses, handbags, fragrance and several other areas.
Furthermore, M has laid out the groundwork on a plan to reward patient shareholders and the company hits the nail on the head with its outline. Macy’s isn’t trying to grow its store count, but rather maintain as much as possible. Mobile and digital are recognized as its long-lasting opportunity for the future. The company’s plan for future growth revolves around real estate, a key reason Macy’s is one of the best retail stocks to buy.
From its investor presentation, Macy’s said “we will enhance our shareholder value through profitable growth and our substantial real estate portfolio.” Macy’s has some of the top real estate in the country due to its location in 49 of the top 50 malls in the U.S.
Starboard Value was an activist investor involved with Macy’s for years, but it was unable to get its way on moves it saw necessary for the company. At that time, Starboard thought Macy’s real estate assets were worth $21 billion, or three times M’s current market capitalization. Macy’s is working with Brookfield Strategic Alliance to sell portions of some of its stores or parking lots to be redeveloped into other uses; asset sales brought in $204 million in 2014 and $673 million in 2015.
Beyond its real estate assets, Macy’s has some promising developments that could boost the value of the stock. A new loyalty program will be rolled out in the fourth-quarter of 2017, in time for the holidays. The company is also growing the number of Backstage locations, an off-price section located in existing Macy’s locations. Backstage locations have seen strong sales and provided an uptick to the number of visits and average transaction amounts.
If you’re looking for dividend stocks to buy, Macy’s may also pop up on your list, with its current 6.5% dividend yield. Some will argue that the company can’t sustain its payout, or that the funds would be better used elsewhere. However, current earnings and asset sales can maintain the dividend for some time, if the company chooses to lure investors in with a high yield.
Macy’s has been ahead of the game on the online front and it has a big opportunity there. Buying M shares right now is putting a big bet on the value of the company’s real estate. Some would argue that you are paying for the real estate and getting the core value for free at the current $7 billion cap.
Despite being one of the largest companies in the world, Exxon Mobil Corporation (XOM) is not safe from seeing shares trading close to 52-week lows. The continuing falling price of oil has hurt XOM shares and hurt the overall value of the company. Exxon continues to invest in opportunities to provide energy for the growing population around the world.
Now more than ever, XOM may be among the best battered stocks to buy.
A common theme from a recent investor presentation from the company was that it’s “positioned to succeed in any environment.” This came up multiple times and echoes the company’s desire to see itself and its share price tied less to the price of oil.
The world’s middle class is expected to hit five billion people by the year 2040. The growing middle class, along with overall population growth, creates opportunities for a company of Exxon Mobil’s size to provide energy needs to people around the world.
Exxon also has more than 100 projects in development, so it isn’t just sitting still hoping for oil prices to recover. The company has taken meaningful steps to reduce its project costs to grow margins. The company has also recognized that technology is the foundation of its future. This means creating new types and uses for plastics, and new types of energy storage, that can help offset the declining price of oil.
In XOM’s first quarter, the company posted incredibly strong results. The company earned 95 cents per share of $4 billion, compared to $1.8 billion in the prior year. Overall revenue increased from $48.7 billion in the prior year to $63.3 billion.
Exxon Mobil had a rough 2016, seeing earnings tumble to $7.8 billion — more than half of the prior year’s $16.2 billion. Earnings-per-share fell to $1.88 as the price of oil hit the company hard. A glance at the first-quarter results looks like the company is seeing an uptick in earnings thanks to increased prices, and better cost controls.
XOM continues to be one of the best dividend stocks to buy as well. Since the merger of Exxon and Mobil, the company has given back $370 billion to shareholders in the form of dividends and share buybacks. Over the last ten years, the company’s dividend has increased at an average annual rate of 8.8%. XOM has raised its dividend 35 consecutive years, including 2017, which saw a 2.7% increase in the second quarter; the stock yields nearly 4% with shares near 52-week lows.
AMC Entertainment Holdings Inc. (AMC) is the largest movie theater operator in the World. Despite record revenues, AMC stock has underperformed compared to its main peers. This makes the stock a prime portfolio candidate and one of the top stocks to buy.
The first quarter of 2017 saw record-breaking domestic box office performance. Thanks to the popularity of movies like Beauty and the Beast and Logan, movie theater stocks saw strong attendance figures during the first three months of the year.
AMC posted all-time high revenue of $1.3 billion, with large increases in attendance and food & beverage sales. The record was helped by acquisitions, but AMC saw strong metrics all around.
Despite the exemplary first quarter and promising future, AMC stock is down 29.8% in 2017. Rivals Cinemark Holdings, Inc. (CNK) and Regal Entertainment Group (RGC) have seen much less damage in 2017. Both are smaller rivals, in terms of theaters, but have larger market caps than AMC.
After completing three acquisitions worth more than $3 billion over the last year, AMC is in position to grow its market share and financials. The company has more than 1,000 theaters and 11,000 screens worldwide. It holds a No.1 market share position in eight countries. In the U.S., AMC has 22 of the 50 highest grossing theaters, including four of the top five. An AMC theater is within 10 miles of 52% of the U.S. population. The company is now more than 50% larger than its next-largest competitor, Regal, on a global basis.
The domestic box office continues to post record results, including the first quarter of 2017, all of 2016 and all of 2015. A strong lineup is coming for the second half of 2017 and into 2018, setting up a good opportunity for AMC stock and its rivals.
The company is positioning itself ahead of its competitors by increasing its add-on features. AMC is the largest IMAX operator in the U.S. with 179 locations. AMC is also the largest Dolby Cinema operator in the U.S. with 67 locations and plans to have up to 160 by the end of 2018. Perhaps the biggest revenue driver is the increased focus on food add-ons. AMC recently announced it has 250 locations serving alcoholic drinks, a nice revenue-driver at theaters. Around one-third of AMC’s U.S. theaters offer alcohol, which should help increase core metrics of average concession per person throughout the year.
AMC priced its IPO at $18 a share back in 2013. The company at the time was hoping to see revenue grow 4% to 5% annually. Since the IPO, the company has far surpassed that figure with annual growth of 8.2%. This figure beats its two main peers, with average gains of 4.5% and 6.2%. There is no reason AMC stock should be down in 2017, while its rivals are up.
This article is from Chris Katje of InvestorPlace. As of this writing, Chris Katje was long shares of IMAX.
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