Though the benchmark S&P 500 index is down only a little over 4% since the start of the year through the Feb. 9 session, that alone doesn’t tell the whole story. Throughout most of January, what were once considered viable stocks to buy suddenly tanked as investors came to grips with possible paradigm shifts in monetary policy and global economic stability.
Obviously, what’s on most market participants’ mind is the Federal Reserve. Throughout the post-pandemic period, the Fed seemingly had little choice but to backstop the pain of the coronavirus to help prevent businesses and individuals from falling into the abyss. But now that American society is gradually on the recovery track, it behooves the central bank to dial down dovish policies. Of course, such a move has serious implications for stocks to buy.
On the geopolitical front, the U.S. faces a Cold War-era standoff with Russia, which many analysts fear is on the cusp of invading Ukraine. Recent military exercises suggest that they could be a prelude to an invasion, putting President Joe Biden’s administration in a tough spot. If Washington simply sits back and allows Russia to do what it wants, this sends a message of weakness to China. Logically, this could alter how investors perceive stocks to buy.
While the overall mood in the market appears pensive, it doesn’t necessarily mean that no opportunities exist. Indeed, this may be an ideal time to exercise contrarianism; that is, zigging when everyone else is zagging. For instance, it’s very possible that the Fed adopts a slow modulation in policy, thus supporting Wall Street instead of outright popping asset bubbles. In that case, stocks to buy could be on a discount.
As well, appetite for conflict — whether from Russia or China or anywhere else — could be more hype than substance. True, the present backdrop seems incredibly volatile. Nevertheless, no world leader wants to risk imploding their own economic recovery efforts. Therefore, if you like to go against the grain, you may want to consider these stocks to buy.
- Bloom Energy (NYSE:BE)
- Stem (NYSE:STEM)
- Lemonade (NYSE:LMND)
- Skillz (NYSE:SKLZ)
- Arrival (NASDAQ:ARVL)
- 23andMe (NASDAQ:ME)
- Fiverr (NYSE:FVRR)
Before we move forward, it’s important to point out that contrarianism could be an overrated strategy for stocks to buy. Sometimes, the crowd could be doing the right thing — it all depends on the circumstances. Therefore, conduct due diligence before moving forward with these ideas.
Bad Bruised Stocks to Buy: Bloom Energy (BE)
Headquartered in San Jose, California, Bloom Energy manufactures and markets solid oxide fuel cells that produce electricity on-site. In particular, the company has commanded attention for its AlwaysON microgrid system, which provides uninterrupted power in case of outages. As you know, rolling blackouts have become increasingly common, imposing costs and straining economic productivity.
However, Bloom Energy’s solutions don’t just mitigate negative events. Through its microgrid system, the company is able to facilitate energy cost predictability by locking in prices. As well, its fuel-flexible and upgradable infrastructure theoretically means that Bloom Energy is future proof. So, why is BE stock down nearly 20% on a year-to-date basis?
Unfortunately, Bloom Energy’s focus on hydrogen fuel cells to help achieve national decarbonization goals is still aspirational. For years, the company has been awash in red ink on the bottom line. On the top line, recent results haven’t been super impressive. For instance, in the third quarter of 2021, Bloom generated $207.2 million in revenue, up a modest 3% from the year-ago quarter.
Still, with increasing political will to support green initiatives, BE could be one of the stocks to buy for contrarians.
Billed as the world leader in artificial intelligence-enabled smart energy storage, Stem is among the stocks to buy levered to the next generation of energy solutions. For instance, the company “builds and operates the world’s largest digitally connected storage network,” enabling its enterprise clients to enjoy maximum flexibility and efficiency in their energy needs.
Key to Stem attracting investor dollars over the years is Athena, which leverages best-in-class data engineering, forecasting and optimization to maximize return on investment. By assessing analytics such as seasonal demand and other dynamics affecting energy consumption, Athena is able to automatically facilitate the most efficient distribution of resources, promoting lower costs through reduced waste and greater predictability for clients.
However, this “paper” narrative hasn’t really worked out that well for STEM stock, which is down 41% YTD. Over the trailing half-year period, it’s staring at a 61% reduction in market value, which would ordinarily scare off arguably most investors. As you might suspect, profitability concerns abound, with the company unable to generate positive operating income at the moment.
However, the steep decline could be an opportunity for contrarian stocks to buy based on political tailwinds.
Bad Bruised Stocks to Buy: Lemonade (LMND)
Offering a variety of insurance products — particularly for renters and pet owners — Lemonade markets itself as an insurance company built for the 21st century. Its claim to fame is an AI-driven protocol that quickly matches prospective customers with quality products that suit their needs. Just open the Lemonade app, let it do its thing for a few seconds and voila! Insurance.
Naturally, the speed and nature of the platform appeals to millennials. While the Covid-19 pandemic may have changed the narrative somewhat, millennials have long been known as the demographic that have failed to meet certain financial milestones — such as homeownership — prior generations achieved.
Therefore, the concept of providing quick and easy renter’s insurance — along with protecting the pets millennials love — seemed like a no brainer. Well, the problem with LMND, as with so many other supposedly viable stocks to buy, came down to the financials. While the top line increased conspicuously, so too did the losses on the bottom line.
However, contrarians might view Lemonade as an idea that needs time to blossom. Therefore, it might be a worthwhile name among stocks to buy.
An online mobile multiplayer video game competition platform that is integrated into a number of iOS and Android games, Skillz commanded serious attention in late 2020 to early 2021. While the company is obviously related to the multi-billion-dollar video-game industry, at the heart of the Skillz brand is connectivity.
Of course, connectivity was exactly what was missing during the worst of the Covid-19 crisis. With most folks sheltering in place while government agencies cracked down temporarily on non-essential businesses, people had limited entertainment options other than video games. By connecting gamers with each other, this action helped mitigate social isolation.
So, why did SKLZ stock shed a staggering 40% YTD? As if that statistic wasn’t bad enough, SKLZ also dropped 65% over the trailing six months and almost 90% over the trailing year. However, InvestorPlace’s in-house optimist Will Ashworth pointed out that Skillz is unlikely to go under, in part because of its surprisingly healthy Altman Z-Score, a common gauge for bankruptcy risk.
Usually, when an equity unit drops close to 90% in a year, there’s a reason for it. However, if you’re the gambling type, SKLZ might be one of your stocks to buy.
Bad Bruised Stocks to Buy: Arrival (ARVL)
Perhaps sporting the most ironic name among high-risk, high-reward contrarian stocks to buy, Arrival risks being eliminated before it has ever truly landed. I’m not hear to make light of the situation for the zero-emissions transportation infrastructure provider, which is quite frankly dire.
On a YTD basis, ARVL stock is down 51% — a half-off haircut before completing the second month of the year. During the trailing six months, shares have cratered over 70%. In the trailing year, it’s down 87%. And just for good measure, against its first closing session — when it was listed under the special purpose acquisition company CIIG Merger Corp — ARVL is down 63%.
No matter what angle you approach Arrival from, you’re liable to see plenty of crimson-stained ink. And that’s just on the technical charts. On the financials, the company is a pre-revenue outfit, one of a number of SPAC-based business combinations that featured no sales. Maybe that was acceptable back when the Fed was backstopping the economy. Today, investors are skeptical.
Still, if you’re a risk-tolerant gambler, ARVL has serious upside potential if the stars align properly.
Shares of 23andMe closed the Feb. 9 session at exactly $5. But aside from the psychologically satisfying profile of a whole number, there’s not much to celebrate regarding ME stock. Against the start of the new year, 23andMe is down 30%. Over the trailing year, it’s shed a whopping 68%.
Maybe it’s not as bad of a loss as some of the other contrarian stocks to buy. However, it’s not a pleasant way to turn the page on the calendar.
Personally, I find this development disappointing simply, because there’s greater desire among people to understand their heritage. According to a 2019 MIT Technology Review article, more than 26 million people have taken an at-home ancestry test. So, why does ME appear to be one of the equities to sell as opposed to stocks to buy?
Part of it could come down to the accuracy of such tests being dependent on available sample sizes from which to draw comparisons. Also, 23andMe is essentially useless to people who already know their ancestry.
Still, such tests continue to attract the curious so it might be worth throwing some under-the-sofa change at it.
Bad Bruised Stocks to Buy: Fiverr (FVRR)
A contract-work marketplace for freelancers, Fiverr attracted significant investor interest during the worst of the pandemic for obvious reasons. With so many businesses suffering an abrupt implosion of demand, performing gig work for companies insulated from the onslaught seemed a reasonable pathway for people across the globe.
At the peak of its power, FVRR stock was trading hands well above $300. However, that was a brief moment of stratospheric ecstasy. Now, post-pandemic realities are starting to hit shares, which are down 28% YTD. Over the trailing six months, FVRR has absorbed a 52% loss in market value.
True, the company demonstrated strong growth, with its Q3, 2021 revenue of $74.3 million up 42% against the year-ago period. However, investors are reasonably concerned that Fiverr may not be able to keep up this pace, especially with the eventual normalization of society.
Still, if you believe in contrarian stocks to buy, here’s my take: it’s possible that companies eventually recall their employees. Frankly, it doesn’t make sense for businesses to pay 100% salaries for employees to goof off — and let’s be honest, you know there’s a fair amount of that going on.
But those that really want to work from home may embrace the gig life permanently, which is where Fiverr comes in.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.