With the indices hitting new high after new high, it’s hard to imagine that there are stocks out there trading at fresh lows. Or if you do realize they’re there, they’re certainly not on anyone’s list of stocks to buy — you probably wouldn’t touch them with a 10-foot pole.
That’s understandable. But sometimes it is worth digging a little deeper to sort out the promising opportunities from the bad seeds. Occasionally a few battered stocks are simply thrown out with the bathwater, guilty by association with a few bad eggs.
I’ve done just that, though, and looked into some of the market’s most-unloved stocks at the moment. Here are five such stocks to buy that have the potential for significant rebounds over the next few months.
Battered Stocks to Buy for a Rebound: Acacia Communications (ACIA)
Acacia Communications, Inc. (NASDAQ:ACIA), a maker of interconnected products, has found itself in a pattern of missed earnings reports and lowered future expectations.
Investors have let it be known that they don’t take kindly to this. The stock has fallen from a high of $128.73 last September to below $40 this week, before rebounding back to near the $44 area..
But even with the lowered outlook, ACIA is still estimated to earn $2.19 a share in 2017 and nearly $3 a share in 2018. And as more companies look to expand their data centers, demand for ACIA’s products will increase as well.
Now that the shares have already priced in all the bad news, the attractive valuation of just 15 times forward sales estimates has them set up for a recovery.
Battered Stocks to Buy for a Rebound: Snap-On (SNA)
Snap-On Incorporated (NYSE:SNA) — a manufacturer of tools and equipment for both commercial and retail customers — has felt the pressure of recent sector rotation.
The stock fell to a new 2017 low this week, but the selloff has actually created an opportunity to build a position in a company that has steady earnings growth. At the moment, SNA shares are trading at a very reasonable price-to-earnings ratio of 16.
I’ll be the first to admit that looking to buy a stock at a year-to-date low isn’t necessarily the best strategy. However, the value SNA represents makes it too difficult to overlook the opportunity.
Battered Stocks to Buy for a Rebound: Diamondback Energy (FANG)
Not to be confused with the infamous FANG stocks, Diamondback Energy Inc (NASDAQ:FANG) is an oil and gas company that has a large interest in the Permian Basin.
The Permian Basin is one of the most lucrative investment opportunities in the energy space, but oil prices hitting their lowest levels since August has taken down all related stocks. FANG fell to a 2017 low this week and is close to breaking down to a fresh 52-week low as well.
Even with oil depressed, Diamondback is expected to continue its earnings growth and should bring in close to $4.57 a share this year. Wall Street is estimating that earnings will get back into the double digits over the next few years, which would equate to FANG climbing back above $100.
With the shares currently trading around $87, that’s a lot of upside to capture.
Battered Stocks to Buy for a Rebound: TripAdvisor (TRIP)
Earnings estimates for online travel company TripAdvisor Inc (NASDAQ:TRIP) have fallen recently as it continues to get hit by higher expenses while trying to keep up with the advertising spending of its rivals.
Investors have punished the stock as a result, sending TRIP to its lowest level since late 2012.
The silver lining here is that there is far too much demand for experiences and travel for TripAdvisor to keep declining. Plus, the company remains profitable with even some potential upside in the coming years.
Picking up the shares now near a multi-year low looks like an attractive risk-to-reward setup.
Battered Stocks to Buy for a Rebound: Chicago Bridge & Iron (CBI)
Global engineering and construction firm Chicago Bridge & Iron Company N.V. (NYSE:CBI) has suffered from inconsistent earnings recently.
While it appears as though that trend could continue for some time, the shares are presenting a very intriguing opportunity right now. Looking ahead, CBI should benefit from an improving global economy as well as the potential for increased infrastructure spending in the U.S.
CBI shares are trading at an eight-year low, and while picking a stock at such depressed prices can be dangerous, I see a lot of potential for upside here.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt is currently in the midst of an exciting launch centered around his trademark three-prong investing approach that targets the mega-trends old Wall Street is missing out on. His next-gen investing strategy is delivering enormous profits in stocks and ETFs. Click here for more information on his latest venture.