While the S&P 500 is up 7.7% for the year, the rising tide has not floated all boats. According to Finviz, 100 stocks are trading within 10% of their 52-week lows, while 38 of its constituents have stocks trading within 5% of their 52-week lows. While some bargain stocks are bargains for a reason, others represent an opportunity to take advantage of overly negative sentiment.
Take Bank of America (NYSE:BAC), for example. At $27.65, it’s trading just 5.1% above its 52-week low of $26.32. Year to date, BAC is down nearly 17%. Over the past five years, it’s lost nearly 9% of its value. Moreover, it’s trading near its lowest point since November 2020.
However, Bank of America is Berkshire Hathaway’s (NYSE:BRK-B) second-largest equity position, accounting for more than $28 billion of the holding company’s $300-plus billion equity portfolio. And while Buffett’s been selling bank stocks in recent years, he remains confident that the system is more robust than the media and politicians portray it to be.
In addition to BAC, here are three bargain stocks trading within roughly 5% of their 52-week lows that investors should consider buying while they are on sale.
| KDP | Keurig Dr Pepper | $32.36 |
| MMM | 3M | $100.50 |
| TRMB | Trimble | $47.81 |
Keurig Dr Pepper (KDP)
Many acquisitions, divestitures and mergers took place over the years to get to Keurig Dr Pepper (NASDAQ:KDP) in its present form. Its many brands, which include Dr Pepper, Crush, Canada Dry, Hawaiian Punch and Snapple, are household names to most Americans.
Down more than 9% year to date, shares are trading within 1.4% of their 52-week low of $31.90. The stock has been unable to get out of a tight trading range between $30 and $40 that it’s been stuck in for the past two and a half years.
Analysts are mixed about KDP’s prospects. Of the 21 that cover it, nine rate it “0utperform” or “buy,” with 11 “holds” and one “sell” rating. Their median target price of $39 is more than 20% higher than its current price.
To capture more of the cold brew coffee segment, which is estimated to grow at a compound annual rate of 22.7% through 2023, the company launched three new iced coffee makers and a new lineup of K-Cups this month. “[T]he new K-Iced brewers hit the spot for consumers seeking the option to brew either a refreshing and delicious iced coffee or a rich, full-flavored hot coffee from one coffee maker at-home,” according to the company’s press release.
Trading at 3.3 times sales, KDP’s valuation is cheaper than it’s been since 2018.
3M (MMM)
3M (NYSE:MMM) has got to be one of the biggest disappointments when it comes to industrial stocks. Shares are down 50% over the past five years. In contrast, the S&P 500 is up 52.5% over the same period.
The company was a dividend darling for so long that investors forgot that it had to have a business strategy to actually grow with any consistency.
A big issue with 3M is that it’s not getting the kind of returns it once did on research and development, which is the bread and butter of its growth strategy. In 2022, the company spent $1.86 billion on R&D, or 5.4% of its annual revenue. That amount could have paid for 55% of the dividends it paid out last year.
I’m not suggesting that 3M stop investing in R&D, but it can’t keep running out new turnaround plans and expect shareholders to hang in there for the long haul. The latest plan calls for 6,000 job cuts on top of the 2,500 previously announced, streamlining its head office structure, simplifying its supply chain, and several other big initiatives to reduce its operating expenses by $700 million to $900 million annually.
MMM is currently trading just 1.2% above its 52-week low of $99.27. Shares are down 16% this year and trading at 1.7 times sales. 3M is cheap for a reason, but if you’re an aggressive investor in search of bargain stocks to buy, the risk/reward seems awfully tempting.
Trimble (TRMB)
Trimble (NASDAQ:TRMB) is a stock I’ve paid attention to in recent years because my wife owns a construction company. Trimble markets Trimble Construction One, a connected construction management platform to help workers manage infrastructure and construction projects.
TRMB is trading 5.2% above its 52-week low of $45.43. That low was hit the day before the company reported its first-quarter results. They were solid, with record annualized recurring revenue of $1.65 billion, 13% higher on an organic basis than a year earlier. On the bottom line, although its non-GAAP operating income was slightly lower compared to last year, at $226.1 million, that represented 24.7% of revenue, 120 basis points higher than a year ago.
Meanwhile, earnings per share of 72 cents were 5 cents better than the consensus estimate. However, revenue of $915.4 million was $14.2 million shy of analyst expectations. Looking forward, Trimble expects to generate $3.89 billion in revenue in fiscal 2023 at the midpoint of its guidance, $120 million higher than the analyst estimate.
The 14 analysts covering Trimble have a median target price of $59, which is 23% higher than where it’s currently trading. All major valuation metrics for TRMB are below their respective five-year averages. Of the three names on this list of bargain stocks to buy, Trimble is the one I’m least concerned about returning to historical valuations.
On the date of publication, Will Ashworth 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.
