While you can always swing for the fences on any opportunity, going for enterprises listed in the Standard and Poor’s 500 could be a shrewd move, thus warranting a closer examination of S&P 500 stocks. Fundamentally, even the worst performers on this list are sometimes miles ahead of lesser-known entities. So, if you’re going to speculate on downcast ideas, you might as well do it here.
Also, a key advantage for S&P 500 stocks is their visibility. Yes, the market features thousands upon thousands of publicly traded securities. But let’s be real here – ain’t nobody has the time to cover all available companies. And frankly, it would be silly to be democratic about the coverage. A relative few deserve the spotlight and most do not.
And with that visibility comes Wall Street’s version of social media influencers: analysts who are likely to give buy ratings to maintain good relations with the companies they cover. Knowing that, these downbeat S&P 500 stocks have a lot to offer the contrarian speculator.
Philip Morris (PM)
As a tobacco giant, the red ink printed by Philip Morris (NYSE:PM) should come as no big surprise. In the U.S., the Centers for Disease Control and Prevention (CDC) saw smoking rates decline from 20.9% in 2005 to 11.5% in 2021. Also, the World Health Organization (WHO) reported similar declines globally. So, why would PM be one of the S&P 500 stocks to buy?
For one thing, while there may have been a broader decrease, the underlying practice remains popular. As a Gallup report noted last year, U.S. cigarette smoking rates have remained steady. Yes, the metric is near historical lows. However, the metric isn’t making improvement to the downside.
More significantly for PM stock, vaping trends have skyrocketed. According to Grand View Research, the global e-cigarette and vape market size reached a valuation of $28.17 billion last year. By 2030, sector revenue could soar to nearly $183 billion, representing a compound annual growth rate (CAGR) of 30.6%.
Lastly, analysts rate shares a consensus moderate buy with a $103.42 price target, implying over 16% upside.
Devon Energy (DVN)
Since the start of the year, shares of Devon Energy (NYSE:DVN) slipped more than 7%. In the past 52 weeks, Devon incurred an equity loss of almost 30%. This volatility too isn’t that big of a surprise. Engaged in hydrocarbon exploration (upstream), Devon depends on a robust underlying market. However, this sector has struggled amid rising interest rates.
Basically, commodities are priced in dollars. And with the Federal Reserve effectively raising borrowing costs, that had a material impact on hydrocarbon pricing. Even a concerted effort among oil-producing nations to artificially lift crude prices failed to pan out. So, DVN seems to be losing relevance as one of the S&P 500 stocks.
However, a booming U.S. economy – not only the gangbusters fourth-quarter GDP but also the latest jobs report – suggests that at some point, demand for oil will rise. Further, population growth through natural means and immigration should boost consumption. Down the line, that’s a positive for DVN.
Analysts recognize DVN as a moderate buy opportunity with a $54.93 average price target.
Newmont (NEM)
One of the more promising gold-mining enterprises, Newmont (NYSE:NEM) has struggled since early 2022. And that situation has not improved in recent sessions. For example, in the past 52 weeks, NEM slipped 30%. Since the beginning of the year, NEM fell almost 19%. As with the other two enterprises, economic and monetary policy circumstances didn’t help.
In a bid to tackle skyrocketing inflation, the Fed spiked the benchmark interest rate. However, that move made everything priced in dollars – including gold and other precious and base metals – less valuable. Of course, that doesn’t help the case for gold. As well, Newmont suffered from company-specific headwinds, most notably the labor strike in one of its key mines.
Still, if the economy is booming, it may bring up enterprises like Newmont. After all, gold and other components represent necessities in innovations such as electric vehicles. Plus, more people having jobs would be inflationary, which is good for gold.
Finally, analysts rate shares a moderate buy with a $47.57 price target, implying almost 43% upside potential.
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.
