For this gallery, I wanted to put together a list of stocks to buy that are trading at or near their 52-week lows. Value investors like these kinds of plays, especially if there is some kind of hidden gem. The theory behind this is that perhaps these stocks will be due a trading bump — especially if the company seems to be going through a temporary problem or dip in its growth.
I had to wade through a good number of inappropriate stocks, especially small-cap stocks. In addition, I filtered out no-merger SPACs (special purpose acquisition companies) and foreign companies where data is scarce.
The idea here is to pick several of these stocks to buy at their 52-week low and accumulate a separate portfolio over time (looking at them each week) in order to diversify this group. In fact, it might even make sense to keep these stocks, which tend to be volatile by their nature, separate from your main portfolio. One or two big winners here will tend to outperform and cover the losses from a number of the other losers.
Here is the list that I came up with this week:
- iShares 20 Year+ Treasury Bond ETF (NASDAQ:TLT)
- Voyager Therapeutics (NASDAQ:VYGR)
- Playtika Holding Corp (NASDAQ:PLTK)
- JOANN, Inc, (NASDAQ:JOAN)
- Coupang, Inc (NYSE:CPNG)
- Multiplan (NYSE: MPLN)
- American Well Corp (NYSE:AMWL)
Stocks to Buy: iShares 20 Year+ Treasury Bond ETF (TLT)
Market Capitalization: $14.2 billion
Interest rates have been rising lately, causing stocks to fall. So if you are a contrarian or value investor, you might be interested in this exchange-traded fund (ETF). This is a play on long-term interest rates. As rates rise, the ETF falls, and so this ETF is near its 52-week low. If you think that interest rates won’t continue dropping, or are at a point of leveling off, you might look at TLT stock.
The reason this is a contrarian play is that as rates rise, the prices of the underlying bonds in the fund fall. As you know, bond prices generally act inversely to the direction of their interest rates. Therefore, if rates keep rising after you buy in, you might have to average cost into your holding as the ETF falls.
In addition, you get to receive an annual interest (or dividend yield in this case) of about 1.6% or so, depending on your cost.
Voyager Therapeutics (VYGR)
Market Cap: $202 million
Voyager Therapeutics is a Cambridge, MA-based clinical-stage gene therapy company. Its lead gene therapy is in Phase 1 clinical trial for Parkinson’s disease. It is also in the pre-clinical study of gene therapies for Huntington’s disease, Alzheimer’s disease, progressive supranuclear palsy, and frontotemporal dementia.
So this is clearly a speculative play for most investors. In the company’s most recent earnings call, the CEO indicated that they are readying their Huntington’s disease therapy for a clinical trial. This was after its Huntington’s investigational new drug (IND) and Parkinson’s IND were put on hold pending resolutions of device issues. These adversely affected VYGR stock. Investors will need to take a long-term approach.
The company has around $175 million in cash on its balance sheet, which will help it to cover expenses as it burns through cash in research and development. This is very close to its market cap, so, in effect, you get the business almost for free. However, it burnt through over $110 million since last year. The company will likely have to raise further capital, which will mean its shares will be diluted. That is also weighing on VYGR price. So again, investors should plan on taking a long-term view here.
Playtika Holding Corp (PLTK)
Market Cap: $10.5 billion
Playtika, which recently went public in mid-January at $27 per share, is an Israel-based company that acquires and develops mobile video games for major mobile platforms. PLTK stock is trading below its IPO price of $27, where it raised about $1.8 billion.
But it is still fairly highly valued, partly from the Roblox (NASDAQ:RBLX) effect. It is at 29 times 2021 estimated earnings and 22 times 2022 forecast EPS. In addition, it is at 4.35 times this year’s est. sales and 3.95 times 2022 forecast sales. By contrast, RBLX trades at 20 times 2021 sales and 15 times 2022 forecast sales. That leaves room for PLTK stock to rise on a comp basis, assuming RBLX is able to maintain its high metrics.
One advantage this company has is that it is free-cash-flow positive and makes a significant profit. Value investors may consider taking a long-term position in this company.
JOANN Inc (JOAN)
Market Cap: $464 million
The popular sewing-and-fabrics retail chain JoAnn Inc. went public earlier this month at $12, after being private since 2011. JoAnn is one of the oldest U.S. retailers for fabric and sewing goods. It currently operates 867 arts and crafts stores in 49 states and has a fast-growing e-commerce business.
Its IPO on March 12 raised $58 million at $12 and the company now has about 40.37 million shares outstanding before options. The stock is trading at $11.50 and this gives it a pro forma market cap of $464 million before options.
This is a little over 20.8% of sales, as the company made $2.24 billion in sales for the year ending Oct. 31, 2020 (see page 4 of its prospectus). The company says that 16% of its sales now are “omni-channel” which can include a mixture of online and in-store buying.
More importantly, it made $217 million in adjusted EBITDA for the year. As the company had $930 million in debt, its net debt is now $872 million, giving it an enterprise value of $1.34 billion. Therefore, its EV-to-adjusted- EBITDA ratio is just 6.1 times, which is not expensive by any measure. The stock could potentially be worth 20% to 30% more based on this metric.
Market Cap: $78 billion
Coupang is a South Korean internet retailer that went public through an IPO on March 11 at $35 per share on the NYSE. At $78 billion, the stock trades at 4.7 times $16.46 billion in estimated. sales for 2021. Bill Ackman, of Pershing Square, personally invested in the company pre-IPO and has a big payday as a result.
The company is growing very fast. Its Q4 revenue of $3.8 billion was up 93% year-over-year, according to its recent prospectus. However, it lost $475 million for the year ending Dec. 31, 2020. In addition, the company is still free cash flow negative. It lost $182.5 million last year in FCF, albeit down from $526 million.
The company raised about $3.4 billion in its IPO, which is 4.4% of its present market value. Amazon (NASDAQ:AMZN) trades at just 4 times this year’s sales and is FCF positive. From that perspective, the company might be overvalued.
Patient investors will look for a chance to buy in the stock at a slightly lower valuation. Or else they can average in at today’s price and at potentially lower prices. Over time the company may grow into this valuation, given its fast revenue growth rate and expectations that it will reach positive FCF this year.
Market Cap: $4.2 billion
Multiplan provides data analytics to the healthcare industry. The stock went public via a SPAC merger earlier this year and is now near a 52-week low.
It didn’t help that a short seller came out with a negative report on the stock in November 2020. It said that Multiplan was going to lose a major client and cash flow as a result. The stock plunged and has yet to recover. However, Citigroup has recommended the stock in November after the stock plunge, saying it is worth $10 per share.
The company recently reported strong results for Q4. Its revenue was up 14.2% over Q3 and up 3.6% over Q4 2019. For the year, revenue was down 4.6%, but adj. EBITDA was up 4.4% year-over-year to $195.1 billion.
However, analysts believe that earnings for 2021 will put the stock at 64 times this year’s earnings and 36 times next year’s EPS. This is still pretty expensive. Value investors may wish to average into this stock over time.
American Well Corp (AMWL)
Market Cap: $4.4 billion
American Well is a telehealth app that connects insurers with patients and other groups, as well as telemedicine applications. The stock has been falling since its IPO in late September 2020 when its first trade was at $25.51. Today the AMWL stock is at $18.80 per share and trades for 16.4 times sales, assuming forecast sales of $269 million in 2021. Amwell will report its 2020 earnings on March 24.
Investors have been leery of the stock ever since management sold a number of their own shares in January 2021 at $27.50 in a secondary offering, with no money going to the company. It also doesn’t help that Stifel said that the company was overvalued in December. Since then the stock has fallen over 25%.
Many investors might want to wait until the company becomes profitable before investing. However, it is close to its all-time lows, and may already discount much of the valuation overpricing, given its growth.
Not all these stocks to buy at 52-week lows should be invested in completely at this time. Some can be invested in with a gradual approach. This is because some of them may continue falling. Value investors are used to this kind of long-term patient investing.
Runner Up – Stocks To Buy At 52-Week Low
Another one of the stocks to buy, as a runner-up, is Vinci Partners Intl (NASDAQ:VINP). This Brazilian private equity firm recently went public in Jan and raised about $100 million. The company will use this to invest in various private firms. It manages about $9 billion as of Dec. 31. Analysts estimate it trades for 20 times this year’s earnings and 14.7 times next year. This is an attractive stock from a valuation standpoint that many investors seem to have overlooked.
On the date of publication, Mark R. Hake did not hold any long or short position in any security mentioned in this article.