After weeks of choppiness, many stocks have been knocked back. A few have become oversold. Here are 3 oversold stocks that look attractive.
Although the stock market has been trading at or near record-high levels, the recent sell-off has rattled some investors, partly due to its breadth. Some stocks, of course, have surged to higher prices.
Home furnishing retailer Williams-Sonoma (WSM) is 36% higher thanks to a strong earnings report, insurance company Hartford Financial Services Group (HIG) jumped 17% following an acquisition bid by rival Chubb, Ltd (CB), and health-foods retailer Sprouts Farmers Market (SFM) rose 11% as its business prospects improve.
While most stocks have fallen, some have been sold down more than others. When markets get jittery, investors tend to sell first and answer questions later. Contrarian investors can take advantage of this broad sell-off by focusing on those that have done the worst. This screening process may identify some gems among the downtrodden, which can create a shopping list of possible purchase candidates among oversold stocks.
A growing number of undervalued stocks are available for the conservative, steady investor to snap up and hold for long-term gain. It’s an exciting time to be a long-term, value investor! And we have a FREE Special Report, How to Find Undervalued Stocks, to help you get started.Get My Free Report!
When looking through this list, it is important to understand why each oversold stock has lagged. Has it been tossed due solely to market jitters over some macro issue that may fade in a few weeks? Was it overvalued but now has pulled back to a more realistic level? Or, has the company run into an operational or strategic issue that may permanently reduce its value?
The most attractive oversold stocks are those that have favorable valuations and fundamentals as well as now-lower stock prices. The following three stocks have been hit relatively hard yet may now be appealing.
Oversold Stock #1: Lands’ End (LE)
This iconic retailer began a long fall from grace with its acquisition in 2002 by Sears, Roebuck & Company. Rather than helping Sears, Lands’ End was mismanaged into mediocrity. Its 2014 spin-off from Sears provided a critical re-start, and the company’s turnaround began in earnest with the arrival of current CEO Jerome Griffith in 2017. Investor confidence remains tepid as the company works to overcome the trifecta headwinds of rebuilding its brand, adapting to the e-commerce era and outmaneuvering the pandemic. The balance sheet is in reasonable shape. After its recent 34% swoon, the shares trade at a much more appealing 10x EV/EBITDA multiple.
Oversold Stock #2: Stratasys (SSYS)
A pioneer in 3D printing, this company’s shares have plummeted more than 50% since early February. The decline seems more of a removal of an extraordinary valuation premium than anything else, as the stock now trades in line with its typical price range over the past five years.
However, the company looks well positioned to participate in the eventual arrival of high-volume 3D-based industrial production. Stratasys continues to advance its capabilities with a combination of internal research and acquisitions, notably its recent purchase of Origin. The balance sheet, which holds $300 million in cash and only $21 million in debt, is being bolstered by a new equity raise to help fund future acquisitions. While the share valuation remains challenging, the much lower price makes the stock worth a look.
Oversold Stock #3: Halliburton (HAL)
When major (and smaller) oil companies like Chevron and ExxonMobil drill for oil, they hire firms to provide specializing products and services to help ensure the best outcomes. Halliburton, with over $14 billion in revenues, is the second-largest company in the critical oil services industry. With the recent tumble in oil prices, from over $66/barrel to the current $57, Halliburton’s shares trade nearly 15% below their recent high. The company is well managed and has a reasonable debt level partly offset by over $2 billion in cash. At its now-reduced price, the stock trades at a modest 7.9x estimated 2023 EV/EBITDA and offers a 3.2% dividend yield.
Bruce has more than 25 years of value investing experience, managing institutional portfolios, mutual funds, and private client accounts. He has led two successful investment platform turnarounds, co-founded an investment management firm, and was principal of a $3 billion (AUM) employee-owned investment management company. Now he is helping his Cabot Undervalued Stocks Advisor readers find those undervalued stocks that let you buy low and sell high!Learn More >>