Who’s thinking of stocks to buy at a time like this?
To put it bluntly, the past few days have been miserable for most investors. The S&P 500 is down more than 7% since its all-time high two Fridays ago. And the echoes of “melt up” chatter are still ringing in investors’ ears.
Maybe the selloff has run its course, and maybe it hasn’t.
One thing is for sure though: A great number of stocks are much cheaper than they were just a few days ago.
With that in mind, it might be time to start thinking about some of the names you’ve had an eye on and making a plan.
To get you started, here’s a run-down of some of the top stocks to buy while they’re beaten down.
Stocks to Buy #1: United Parcel Service, Inc. (UPS)
United Parcel Service, Inc. (NYSE:UPS) just misjudged the demand for shipping services last year — largely caused by Amazon.com, Inc. (NASDAQ:AMZN). As a result, UPS had to shell out $125 million in unexpected costs last quarter. Ultimately, the company will need to shell out as much as $7 billion to add enough capacity to meet future demand.
Between that shock and the marketwide bearish tide, UPS stock has fallen 15% since its mid-January peak.
But it’s wise to recognize those expenditures for what are: a revenue-bearing asset that’s being put in place in preparation for the ongoing explosion of e-commerce.
A Pitney Bowes outlook posted late last year suggests global parcel volumes will increase between 17% and 28% every year through 2021.
Stocks to Buy #2: Align Technology, Inc. (ALGN)
Immediately after Align Technology, Inc. (NASDAQ:ALGN) reported its fourth-quarter results last week. the market had the right idea. Shares surged in response to the Q4 earnings beat — but only for a short while. By the end of that trading session, ALGN was en route to what so far has been a 15% rout.
The selling was more than a little overzealous though.
The company, which makes the invisible dental braces you’ve probably seen advertised on television, grew its top line by more than 36% in 2017, and analysts are looking for more than 25% growth in sales this year. Earnings have been and should continue to expand at an even faster pace, making Align Technologies one of the top growth stocks to buy for the foreseeable future.
Stocks to Buy #3: Regeneron Pharmaceuticals Inc (REGN)
Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the biopharma name behind some of the marketplace’s recent exciting developments. Regeneron — in league with Sanofi SA (ADR) (NYSE:SNY) — won the FDA’s approval for cholesterol-fighting drug Praluent early last year. And its Eylea, for age-related macular degeneration, was first approved back in 2011. The approved-use list has expanded nicely ever since.
And the drugs are gaining traction. The company’s sales were up 23% for the third quarter, extending its growth streak.
Meanwhile, its relatively young atopic-dermatitis drug Dupixent holds enormous growth potential of its own. Polen Capital recently noted, “We believe Dupixent will likely be approved for a range of allergic diseases in the future and, as such, has a reasonable path to becoming a multi-billion-dollar product for the company.”
So why the 35% pullback since the middle of last year? Polen’s report explained “Regeneron’s weakness this year has been due to positive clinical developments by other companies that could bring competition to Eylea and Dupixent in the future.” Polen does not believe that any of these developments pose a significant risk to Regeneron, however.
REGN hit 52-week lows just this week. And it may be one of those great speculative stocks to buy given its recent weakness.
Stocks to Buy #4: Chevron Corporation (CVX)
Chevron Corporation (NYSE:CVX) headed into fourth-quarter earnings report with a disadvantage. Though crude prices started 2018 just as bullishly as they ended 2017, that rally was starting to stumble during the latter half of January. Since oil stocks and oil prices generally move in tandem, a pullback from crude itself would undoubtedly apply pressure on CVX stock.
The earnings miss for Q4 only fanned the selling flames. Since reporting a bottom line of 72 cents per share versus analyst expectations of $1.22, Chevron shares have slid about 15% from their early-January peak.
There may be more downside in store. But Chevron is still moving towards better profitability and a has dividend yield of 3.9%, so bargain hunters may want to take a closer look.
Stocks to Buy #5: Synaptics, Incorporated (SYNA)
It’s likely that you’ve used a Synaptics, Incorporated (NASDAQ:SYNA) product without even realizing it. Synaptics makes the touchpads for built-in mouse on laptops, touchscreen technologies, fingerprint readers and more.
And the product line is in its prime as mobile technology is hitting full stride.
Keybanc analyst John Vinh likes the product line well enough to recently upgrade SYNA. He recently explained:
“Meetings at CES with supply partners and competitors left us incrementally more positive regarding SYNA’s opportunity associated with in-display fingerprint. Additionally, we gained a greater appreciation for the Company’s smart home opportunity not only at Amazon and Google, but also with Asia operators. We are upgrading SYNA to Overweight given greater confidence associated with the turnaround story.”
SYNA has seen a pullback of about 20% since mid-January. That selloff, however, may have had nothing to do with the company and everything to do with profit-taking and fear.
We’ll have a better idea about the matter when the company reports earnings after Wednesday’s close. The response may well be more bearishness, but if it is, so much the better. It will just make shares just cheaper in front of 2018’s expected profit growth of 10%.
Stocks to Buy #6: Acuity Brands, Inc. (AYI)
A quick glance at all the recent news about Acuity Brands, Inc. (NYSE:AYI) is terrifying. A massive class action lawsuit is being prepared on behalf of investors who are unhappy about the 47% pullback shares have suffered since mid-2016. Shares are currently down more than 15% since the end of last year.
So why even entertain the idea that Acuity belongs on a list of stocks to buy in the midst of this carnage? Because the fear and greed linked to the lawsuit have largely obscured the fact that earnings are projected to grow 11% this year and grow nearly 9% next year. That’s not red hot, but it does turn a stock that’s only trading at a forward-looking P/E of 14.2 into a bargain.
Acuity Brands makes LED lighting equipment and control systems — a market that is expected to grow from $26.1 billion in 2016 to $54.3 billion by 2022.
Stocks to Buy #7: Roku Inc (ROKU)
Back in November, I said that Roku Inc (NASDAQ:ROKU) was one of the market’s most underestimated opportunities, but added that the stock was a buy only after a steep pullback. Well, that pullback has arrived. The 26% slide from December’s high may provide the perfect buying opportunity for this surprisingly successful newcomer to the streaming TV and media market.
And I’m not the only one that feels this way.
Needham analyst Laura Martin reiterated her bullishness on ROKU stock last week, cautioning anyone holding a short position in the stock to cover that trade. Not only is Roku likely to be added to major market indices, it’s a potential acquisition target now that it’s gaining unexpected traction in the streaming video space.
Stocks to Buy #8: Pfizer Inc. (PFE)
Pfizer Inc. (NYSE:PFE) has been working on a sale of its consumer health division (which owns Advil, Chapstick, Nexium and more) since October of last year. Those are well-established brand names, but the company would rather focus on higher-payoff pharmaceuticals.
Selling the consumer-oriented arm might not be as easy as first expected though. Only two organizations ended up making bids by last week’s deadline, while at least two suitors that would have been good fits bowed out without even making a low-ball bid.
Their concern? Stagnant sales of those consumer products.
Now wondering if Pfizer will be able to sell that division at a fair price — or if it can sell it at all — investors sent PFE stock lower by more than 5% on Monday, topping off a 12% pullback since late January.
Big mistake. Though the worry is understandable, the price weakness has driven the trailing P/E to a very affordable 9.8 and driven the dividend yield to a very attractive 3.7%.
Stocks to Buy #9: Alaska Air Group, Inc. (ALK)
Alaska Air Group, Inc. (NYSE:ALK) shareholders have had a tough year. It’s down 33% since this point in 2017, and has fallen nearly 14% just since the end of last year.
The punishment doesn’t fit the crime, however. The stock’s selloff suggests Alaska Air is moving in the wrong fiscal direction, even though it isn’t. Last year’s revenue was up 34%, while the only reason profits were down was the unexpected increase in fuel costs — back to levels more in line with the historical norm.
Demand for air travel has been and remains strong. In fact, the International Air Transport Association recently reported that airlines would likely enjoy record profits in 2018. Alaska Air is still well positioned to take its fair share of those earnings.
It’s admittedly a bit self-serving for the company’s top brass to ask shareholders to simply remain patient, as they did in the recent Q4 earnings call. But with the stock trading at a single-digit P/E on a trailing and a forward-looking basis, it’s not as if management doesn’t have a good point about the underlying value that just needs time to be appreciated.
Stocks to Buy #10: Applied Materials, Inc. (AMAT)
Last but not least, the 14% plunge Applied Materials, Inc. (NASDAQ:AMAT) has dished out since mid-January has been tough on faithful shareholders. But, that weakness may be an open door for anybody who wanted in but didn’t want to pay too much for the stock.
At only 15 times its trailing earnings and 11 times its forward-looking earnings, AMAT is plenty affordable.
Yes, Applied Materials is in the highly volatile semiconductor industry. It’s not as subject to the cyclical swings as most chipmakers seems to be, however. AMAT makes the equipment and materials used by semiconductor manufacturers, which is a business that’s always in decent demand.
Its exposure to the solar panel market further diversifies its revenue-bearing product base.
Analysts, by the way, are looking for earnings to reach $4.04 per share this year, up from 2017’s $3.25, on revenue growth of nearly 17%.
As of this writing, James Brumley held a long position in Alaska Air. You can follow him on Twitter, at @jbrumley.