There’s a long list of beaten-down stocks to buy, and plenty of reasons to get excited about a potential recovery. For one, we just learned that retail sales were up 1.3% in Sept., which was better than expectations for 1%. Meanwhile, members of the Federal Reserve appear to be less strict with future interest rate hikes. For example, Federal Reserve Governor Christopher Waller said he’d be “comfortable” with the central bank opting for a half-point rate increase, instead of a third-quarter point hike.
In addition, I think the economy, barring some sort of disaster, is heading for a soft landing, making this an excellent time to look for beaten down stocks to buy. While these seven stocks have taken big hits, they have strong, upcoming positive catalysts, making them very likely to embark on huge comebacks in the not-too-distant future.
|SQM||Sociedad Química y Minera||$91.30|
Rivian (NASDAQ:RIVN) fell more than 68% in 2022. But don’t write it off just yet. The electric-vehicle maker was able to produce a meaningful total of more than 7,300 EVs in the third quarter, and its “second manufacturing shift [at its key factory recently] started producing vehicles.”
Moreover, the automaker has obtained more than 114,000 preorders, and that doesn’t incorporate its lucrative deal with Amazon (NASDAQ:AMZN). Add in the fact that Rivian has signed a partnership deal with Mercedes-Benz (OTC:MBGYY), while its R1T pickup trick was named the “Truck of the Year” by MotorTrend, and it’s clear that Rivian has a strong future.
Providing added validation for Rivian’s outlook, InvestorPlace Senior Investment Analyst Luke Lango recently noted that, in Q3, RIVN was “the single-most bought EV stock by hedge funds in the third quarter of 2022 (by share volume).”
BlackBerry (NYSE:BB) is down over 50% this year. However, I’ve’ long believed that BlackBerry’s auto software platform (IVY) will become a big revenue generator for the IT security company. The company will generate sales through IVY by allowing automakers and app developers to sell services on the platform.
On BlackBerry’s third-quarter earnings call, CEO John Chen noted that the company expects to obtain design wins for IVY next year. He added that, “IVY remains firmly on track with proof-of-concept trials progressing well, and the team is executing on the product development roadmap as planned.”
Robert W. Baird analyst Luke Junk has agreed with my take on IVY, saying that the platform “could be the start of something big.”
Moreover, BB apparently expects increased spending by governments and businesses on cybersecurity, along with higher penetration by its QNX operating system, to meaningfully lift the company’s top line over the long term.
That’s the conclusion I draw from the company’s guidance that calls for the revenue of its cybersecurity unit to increase at a compound annual growth rate of 10% over the next five years and predicts that its IoT sales will increase at a CAGR of 20% over the same period.
Lithium miner Livent (NYSE:LTHM) signed a six-year lithium-supply deal with General Motors (NYSE:GM). The agreement, which includes an advanced payment of almost $200 million, is set to begin in 2025. With GM rapidly becoming one of the biggest players in the EV race, Livent’s significant foothold with GM is a big deal. (Pun intended).
Also noteworthy, unlike many other lithium firms, Livent is already generating a great deal of revenue, while its sales rise. And, by some measures at least, it’s already profitable. Last quarter, its earnings per share, excluding some items, came in at 41 cents, versus analysts’ average estimate of 39 cents, while its top line soared 124% year-over-year to $232 million. Liven expects its 2023 EBITDA, excluding some items, to be $350 million to $370 million.
Livent is in the midst of greatly expanding its lithium-producing capacity, leaving it very well-positioned to exploit the electric-vehicle revolution.
Sportsradar (NASDAQ:SRAD) “provides sports data services for the sports betting and media industries.” It also sells software to those sectors. With college and professional sports in general and sports betting in particular becoming truly huge businesses, it’s not surprising that Sportsradar recently reported very impressive third-quarter financial results.
Specifically, its top line rose 31% year-over-year to $175 million, while the sales of its U.S. business soared 61% year over year to $31 million. Additionally, Sportsradar reported that its U.S. business became “profitable” for the first time, delivering an EBITDA margin, excluding some items, of 11%. Meanwhile, its overall adjusted EBITDA soared 75% YOY to $35.8 million.
“The financial results in the third quarter demonstrated that Sportradar consistently has managed to grow almost three times faster than the underlying betting market and our growing scale has led to margin expansion – as indicated by the U.S. segment turning profitable in the third quarter. ” Ulrich Harmuth, Interim Chief Financial Officer stated in a company press release.
The company expects its top line to increase about 25% in 2023 and anticipates that its 2023 adjusted EBITDA margin will be higher than in 2022.
PENN Entertainment (PENN)
Sportsradar’s success may bode well for PENN Entertainment (NASDAQ:PENN), which owns another leading sports-gambling player, Barstool.
And last quarter, Barstool’s top line jumped 70% year-over-year to $159 million. Moreover, another InvestorPlace columnist, Muslim Faroque, earlier this month reported that the business “could potentially be profitable by mid-2023.” Consequently, Barstool could really start moving the needle for Penn in 2024.
Despite this strong, potential, positive catalyst, PENN stock, likely reflecting overly pessimistic worries about a recession, is trading at an undemanding forward price-earnings ratio of just 19.7. Finally, the stock’s price-sales ratio is a tiny 1.1. The shares are a very cheap way for investors to gain exposure to the lucrative sports-betting sector and to bet against overdone worries about a pending recession.
Best Buy (BBY)
Down 49% over the past year, Best Buy (NYSE:BBY) looks like a “best bet” for value investors at its current levels. BBY stock tumbled 9% yesterday after government data showed that “electronics and appliance sales were essentially flat from September and fell 6.4% from 2021,” in the words of Seeking Alpha.
But I’m willing to bet that, in the modern era of complex, widely differentiated devices, that BBY, which has much more knowledgeable sales experts than its competitors, performed much better than they did. (We’ll find out when Best Buy reports its Q3 results on Nov. 22).
Additionally, as I’ve pointed out in the past, eventually consumers’ preference for spending money on experiences rather than goods will dissipate, causing Best Buy’s results to greatly strengthen. Those who buy BBY stock get paid to wait, as the saying goes, since the shares’ dividend currently yields a very impressive 4.67%
Sociedad Quimica y Minera (SQM)
Lithium producer, Sociedad Quimica y Minera (NYSE:SQM) just reported third-quarter results that appear solid. Specifically, its top line soared nearly 350% year-over-year to almost $3 billion, while its earnings per share came in at a record high of $3.85, beating analysts’ average outlook by 47 cents.
“We have believed in the lithium market for many years, and as a result of this, we have invested heavily in R&D and have quickly expanded capacity,” explained Sociedad CEO Ricardo Ramos, adding that lithium prices rose” throughout the third quarter.”
Sociedad is continuing to increase its lithium capacity. In fact, it’s looking to boost its capacity in Chile to 100,000 metric tons from 40,000 metric tons. The firm should continue to greatly benefit from the electric-vehicle revolution going forward. Calling SQM “a low-cost lithium producer,” Seeking Alpha columnist Michael Wiggins De Oliveira expects the company “to benefit materially from higher lithium prices, that continue to move up and to the right.”