As I write this, there are less than two weeks left until Christmas Day. Though there are only a few days of trading left until the end of the year, it’s not too late to boost your portfolio’s 2019 performance with these cheap stocks to buy.
How good a year has it been?
The S&P 500 is up 27.5% year to date (YTD). Every sector, including energy, are solidly in the positive with information technology stocks leading the way, up 44%.
Each of the stocks selected for this list of stocks to buy has a market cap of $2 billion or more and has lost 10% or more at some point over the past month.
Out of 1,825 stocks with a market cap greater than $2 billion, only 62 had lost 10% or more in a month as of Dec. 12. Even after today’s gains, these stocks remain in the red over the past 30 days.
Here are my top 10 stocks to buy from the group of 62.
Stocks to Buy: Abiomed (ABMD)
So far, 2019 has been a downer for long-time shareholders of Abiomed (NASDAQ:ABMD).
Down 46% YTD, ABMD stock has had better performances in recent years. The maker of Impella heart pumps has generated an annualized total return of 36% for loyal shareholders over the past decade.
If you’re one of the lucky ones who’ve owned its stock for the past 10 years, congratulations on a buy well done. If you’re one of the unlucky ones who got in at some point during 2019, be patient, your turn will come.
As I stated in my recent article about the seven S&P 500 stocks I expect to deliver over the next decade, just as they did this past decade, Abiomed ought to continue to gain market share as the population continues to age.
Down 20% over the past month, take advantage of Abiomed’s correction and buy some more.
A.O. Smith (AOS)
A.O. Smith (NYSE:AOS) is one of my all-time favorite stocks.
Sure, there are plenty of names I could list off that I’ve recommended over the years that have done better than the Wisconsin-based manufacturer of water heaters, boilers and water softeners. Still, there are very few that I would consider “stick-in-a-drawer” type stocks that you can forget about for a decade or more and still make out okay.
AOS is one such stock.
Over the past decade, A.O. Smith has generated an annualized total return of 21.4%. Yet, it’s been unable to break out of single-digit gains in 2019. Up 9% YTD, the 8% decline over the past month hasn’t helped one iota.
In October, my InvestorPlace.com colleague, Ian Bezek, made AOS one of seven mid-cap stock selections. Bezek reasoned that the trade war is killing the company. Once an agreement is reached, the sky’s the limit for AOS. In the meantime, you can enjoy the Dividend Aristocrat’s 2.1% yield.
The one thing I know is you can’t keep a good dog down. A.O. Smith’s stock trajectory will soon turn to the stars. When it does, you’ll be glad I mentioned it.
Dell Technologies (DELL)
It’s hard to believe that Michael Dell, CEO of Dell Technologies (NYSE:DELL), is 54 years old. It seems like only yesterday we were reading about this up-and-comer who started a computer business in his dorm room.
And while the Texas entrepreneur has had his ups and downs in recent years, the fact Dell stock has lost more than 11% in the past month, do provide tech investors with a much more attractive entry point.
InvestorPlace.com contributor Vince Martin owns Dell stock. He recently suggested that the company’s 81% stake in VMware (NYSE:VMW) could be worth substantially more in the future should Dell decide to buy out the remaining minority shareholders.
The reality is that Dell generates significant free cash flow — the company’s trailing 12-month free cash flow of nearly $5.9 billion is 150% of its net income — which makes the correction over the past month an opportune time to make money on one of the few tech stocks performing in 2019.
DuPont de Nemours (DD)
For those unaware, DuPont de Nemours (NYSE:DD) used to be part of DowDuPont; the company created when Dow and DuPont merged in 2017, only to be demerged two years later into three separate companies.
As a result of the de-merger, DD stock began trading on the NYSE on June 3. It joined former stablemates Dow (NYSE:DOW) and Corteva (NYSE:CTVA) as publicly traded, independent companies.
DuPont is a specialty chemical maker whose products include advanced plastics, adhesives and enzymes for the production of cars, electronics and many consumer goods. Dow is responsible for commodity chemicals and Corteva makes seeds.
Together, the three entities were one massive company. Separately, though, they’re still three incredibly complex businesses.
In the past month, DD stock has shed more than 10% of its value. Since becoming an independent company in June, DuPont de Nemours stock had a quick burst out of the gate, closing its first day of trading at $76.10, up 18%. It has since lost all of those gains and then some.
DuPont and the other two companies were de-merged specifically to add value for DowDupont shareholders. I would expect some of those benefits to be realized in 2020.
Foot Locker (FL)
Foot Locker (NYSE:FL) has traded below $40 on three occasions since late 2013.
On the first occasion, in December 2013, the sneaker and apparel retailer broke through $40 for the very first time after recovering from the 2008 recession, which saw its stock drop to less than $6.
The second occasion was in September 2017, and the third and final time dropping below $40 came in August. So, except for a brief November rally, FL stock been in the dumps since the fall.
On Nov. 22, Foot Locker reported healthy third-quarter revenue and earnings per share (EPS) numbers. On the top line, sales rose 3.9% to $1.9 billion while on the bottom line, EPS increased 18.9% to $1.13. Also, same-store sales grew by 5.7%, which suggests the company is making progress, positioning itself to compete in the changing world of retail.
Unfortunately, the company’s prediction of flat same-store sales growth in the fourth quarter — down from a 9.7% increase in last year’s fourth quarter and worse than the 2% growth estimate from analysts — sent FL stock spiraling lower.
As a result, Foot Locker’s total return over the past month is -18.9%, considerably worse than the 2.6% gain for the U.S. total market.
Foot Locker tends to be conservative when providing quarterly guidance, so I wouldn’t be surprised if same-store sales weren’t favorable in the fourth quarter.
Of all the stocks on this list, Hess (NYSE:HES) is the one company whose 2019 performance couldn’t be characterized as anything but successful. Despite a 9% correction over the past month, HES has generated a YTD total return of 56% — doubling the performance of the U.S. total market.
Hess has severely underperformed in recent years, generating a five-year annualized total return of -0.3%, almost 12 percentage points worse than the total U.S. market. Reversion to the historical mean was bound to happen at some point.
In 2013, Hess began the arduous process of selling off some of its assets to focus on energy production and exploration. Activist investor Elliott Management pushed management to become an energy pure-play.
The only problem with that plan is that oil and gas exploration hasn’t been nearly as profitable over the past five years due to weaker prices. That said, it has managed to perform exceptionally well in a challenging business environment.
The recent drop is likely attributable to investors taking profits.
YTD, Kohl’s (NYSE:KSS) has a total return of 23.2%. In the past month, it has lost nearly 14%. Yet, Retail Dive named CEO Michelle Gass, its retail executive of the year.
Of course, Retail Dive isn’t nearly as concerned as InvestorPlace.com readers about the performance of its stock. It’s more interested in innovation, and on that front, it feels Gass has delivered in a big way.
One of its most significant initiatives in 2019 was the rollout of its returns program in partnership with Amazon (NASDAQ:AMZN). A pilot project since 2017, this year, Gass went all in, providing the e-commerce giant with 1,150 locations across the U.S. where customers could return products they weren’t happy with.
As I noted in October, this was a partnership that would prove beneficial for both companies.
As for Christmas, Kohl’s is staying open 24 hours a day from the morning of Dec. 20 to 6 p.m. on Christmas Eve. I don’t know how many extra shoppers it will snag with this approach, but it’s another sign Gass is trying every lever at her disposal to drive sales in a weak department store environment.
While there are several other retail executives worthy of this award, Gass is facing extraordinary challenges.
I expect a full recovery in 2020.
MasTec (NYSE:MTZ) was sailing along in 2019 and then came November, and the wheels fell off.
Since then, MTZ’s given back all of the gains it made in October. Down almost 15% in the past month, the infrastructure construction stock has still delivered a YTD total return of 49%, easily beating the markets as a whole.
At the end of October, MasTec reported Q3 2019 results that beat analyst estimates. On the top line, it had an EPS of $1.73, 10 cents clear of the consensus and 30% higher than its profits last year. In the past four quarters, it has beaten the estimate on all four occasions.
On the bottom line, MasTec’s revenues were $2.02 billion, 5.3% lower than the consensus estimate of $2.13 billion. However, it did manage to grow sales 2% over the same period a year ago.
Not to worry.
Through the first nine months of its fiscal year, Mastec’s revenues have grown by healthy 9.7%, while its adjusted EBITDA has risen by 20.5%.
With a diversified group of four revenue streams — Communications, Oil and Gas, Electrical Transmission, and Power Generation/Industrial — MasTec’s business is insulated from any single industry going into a slowdown.
As long as America continues to have tremendous infrastructure needs, MasTec stock should continue to do very well.
PagSeguro Digital (PAGS)
There are several things I like about Brazilian payments company PagSeguro Digital (NYSE:PAGS).
First, I’ve been a big believer in Latin America for many years. Here’s what I said about the region in July 2012:
“As Brazil prepares to host the 2016 Summer Olympics, some in Latin America suggest economic gains made since the beginning of the global financial crisis have benefited the rich and powerful at the exclusion of everyone else. Further, the structural changes necessary to build a flourishing middle class have yet to appear, making these gains illusory at best.”
While I do agree that investors should be cognizant of the continuing disconnect that exists between the wealth of these countries and the average citizen, the future remains brighter for Latin America than it’s ever been. Tread carefully, but don’t let the rhetoric spoil one of the best investment opportunities anywhere.
Everything I said back then still applies today. The opportunities in Latin America are endless.
Secondly, while investors didn’t seem to like PagSeguro’s third-quarter results delivered in November — PAGS stock has seen an 13% decline over the past month — I see a business that’s growing at a very healthy pace.
Total revenues grew 28.7% in the quarter on the top line while on the bottom, its net income increased by 47.5%. Furthermore, its total payment volume (TPV) jumped 45% in the quarter to $7.2 billion.
As a payments processor, you want to see higher TPV. In the third quarter, it grew the metric just fine.
Forget the investor reaction. This is a buying opportunity.
The great thing about prognosticating about stocks is that you’ve got nowhere to hide. If you make a recommendation about a particular stock and it tanks, your words are permanently on display — making it easy for readers to second-guess your opinions.
At the end of October, I recommended Rollins (NYSE:ROL) along with nine other stocks investors should consider regardless of their latest quarterly earnings.
Rollins specializes in pest control. Its Orkin brand serves more than 1.7 million residential and commercial customers on every continent except Antarctica. Many of its customers have stuck with it for decades, which allows it to generate a significant amount of recurring revenue.
I love the fact that the Rollins family, who own more than 50% of its stock and are intimately involved with the company, understand the importance of customer service in a business that you usually wouldn’t consider customer friendly.
Once you’ve got a good pest control person, especially if you’re in real estate, it’s hard to let them go knowing the importance of pest-free environments.
The longer you hold Rollins stock, the better your results are going to be. It’s the ultimate buy-and-hold stock.
Down almost 9% over the past month, it’s looking like Rollins will have its first year of negative calendar returns in many a moon. Don’t miss out on this buying opportunity.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.