3 Beaten-Down Stocks to Buy for Massive Long-Term Gains


  • These beaten-down stocks are bargains at their current valuation.
  • JD.com (JD): Chinese e-commerce remains a promising long-term growth story.
  • Metlife (MET): Life insurers benefit from higher interest rates and have been unfairly punished this year.
  • Endava (DAVA): This fast-growing IT firm is now selling at a huge discount.
beaten-down stocks for long-term gains - 3 Beaten-Down Stocks to Buy for Massive Long-Term Gains

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Despite inflation, rising interest rates, and the recently solved debt ceiling crisis, the stock market has had a solid 2023. With that being the case, investors are looking for bargains amid a rising market. In other words, it’s a good time to consider beaten-down stocks for long-term gains.

Uncertain economic times can cause people to fear investing in the market. And a fair number of storm clouds are on the horizon today. But ultimately, it is time in the market that drives a huge chunk of returns. By investing in beaten-down stocks, people can still have their capital at work without taking as much risk as in high-flying and potentially overvalued stocks.

These are the three top beaten-down stocks today.

JD.com (JD)

JD.com (JD) logo displayed at the entrance to the company's Silicon Valley office.
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JD.com (NASDAQ:JD) is the perfect company to own for a potential massive long-term gain. The Chinese e-commerce giant has grown tremendously since going public nearly a decade ago. Just since 2018, revenues have been up from $67 billion to $152 billion last year.

The Chinese economy has suffered from a prolonged slowdown amid continuing COVID-19 restrictions. The lockdowns initially bolstered the prospects of e-commerce firms such as JD, but that momentum has faded over the past year.

Regardless, the company continues to grow, with analysts forecasting 4% revenue growth this year and a return to double-dip top-line gains in 2024. That makes JD stock an outright bargain, as shares sell for just 12 times forward earnings today. Founder Richard Liu has returned to a more hands-on role at JD to help the company thrive in the post-pandemic landscape as well.

MetLife (MET)

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MetLife (NYSE:MET) is one of America’s largest insurance companies. Like many financial companies, MET stock has come under fire in 2023; shares are down nearly 30% year-to-date. With that decline, MetLife shares are trading back to the same levels we saw 15 years ago.

Investors are worried about interest rates. Due to soaring interest rates, life insurers, including MetLife, have unrealized losses on their securities portfolios.

However, insurance companies aren’t banks. People don’t pull their money out of insurance in the same way that they can move money instantly out of banks. The truth is that insurance companies are designed to invest on a decades-long time horizon to match their assets against future life insurance liabilities.

In fact, much higher interest rates are a net positive for MetLife since the insurer can put new capital to work at far higher rates. MetLife should see much higher profitability in future years thanks to the current disruption. With the recent stock price decline, MetLife sells for just six times forward earnings and offers a 4.0% dividend yield.

Endava (DAVA)

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Endava (NYSE:DAVA) is a leading information technology solutions company focused on the financial industry. Given the painful correction we’ve seen in banking and insurance stocks in 2023, understandably, investors are dumping the IT consultants for the banks as well.

However, things have gotten out of hand. For DAVA stock specifically, shares are down from a peak of $170 to around $55. This is incredible. Endava is debt-free and highly profitable; there’s no wipeout risk here.

Not only that, Endava is continuing to show rapid growth. In its fiscal Q3 earnings report this week, Endava saw revenues surge 20%. Earnings per share rose from 48 pence to 59 pence per share. These are not the figures one usually sees when a company’s stock has lost two-thirds of its value.

Endava shares are now going for 20 times the estimated 2023 years and 18 and 15 times the estimated 2024 and 2025 earnings, respectively. Buying a tech company with double-digit revenue and earnings growth at such a low starting multiple is rare. Once concerns around banks’ IT budgets subside, Endava should enjoy a strong recovery.

On the date of publication, Ian Bezek held a long position in DAVA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

Article printed from InvestorPlace Media, https://investorplace.com/2023/05/3-beaten-down-stocks-to-buy-for-massive-long-term-gains/.

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