The bear market carries on, with little end in sight. Additionally, high inflation continues to be an unresolved issue. The Federal Reserve’s rate hikes to temper this inflation may be far from completion. In turn, a recession keeps on becoming increasingly likely. Yet, amidst this doom and gloom, there may be an opportunity with certain oversold value stocks.
We’ve heard quite a bit about growth stocks taking a beating so far in 2022, but many value plays have been hammered as well. As a result, many stocks that before were reasonably-priced have become arguably value or deep value plays.
That’s not to say you can buy these stocks now, and see fast profits in a quick recovery. In fact, it’s likely going to be a while before the market gets out of its current slump. Even so, ahead of a recovery, while sentiment remains overly negative, you may want to start making a few contrarian wagers.
With all of that in mind, these seven oversold value stocks could be viable options. Each one of them trades at a low valuation, and could bounce back in a big way once the market’s worries subside.
Therefore, let’s dive in and take a closer look at each one.
|NXST||Nexstar Media Group||$|
|NYCB||New York Community Bancorp||$|
|WBA||Walgreens Boots Alliance||$|
|WBD||Warner Bros. Discovery||$|
Oversold Value Stocks: Boyd Gaming (BYD)
Boyd Gaming (NYSE:BYD) is a Las Vegas-based gaming operator. It owns “locals casinos” in Las Vegas, as well as regional gaming properties throughout the United States. Trading for just 10.31 times estimated 2022 earnings, it sells for a lower multiple than peers such as Penn National Gaming (NASDAQ:PENN).
With growing fears of an economic downturn, it makes sense that gaming stocks have taken a hit this year. However, it’s possible the market is overestimating how badly the industry will far in a recession.
If you have the same view, BYD stock may be one of the best plays in the space right now. At least, that’s the view of Loop Capital’s Daniel Adam. The analyst recently gave the stock a “Buy” rating, and an $86 per share price target. Adam’s rationale? The company’s success in sports betting, and the fact its core Las Vegas business remains “vibrant.”
Thus, consider BYD stock as one of the top oversold value stocks to buy.
Just a month ago, shares in retailer Kohl’s (NYSE:KSS) were a hot takeover play. Now? With deal talks terminated, the stock has cratered. Right now, it trades for around $29 per share. That’s well below the more than $40 per share it traded for in mid-June, and a far cry from the $64 per share one bidder offered for it earlier this year.
It’s not just the fact a deal’s been called off that KSS stock is tumbling. No longer a takeover target, the market is pricing more of the retail industry’s headwinds into it. High inflation could seriously impact consumer demand. Not to mention, put more pressure on its margins.
So, with takeover hopes now faded, and uncertainty running high, why buy Kohl’s? These risks may be more than accounted for, with its current fire-sale valuation. Shares now trade for a forward price-earnings (P/E) ratio of 5.3 times.
Oversold Value Stocks: Nexstar Media Group (NXST)
Nexstar Media Group (NASDAQ:NXST) is one of the largest owners of television stations in the U.S. It owns and/or operates 198 network affiliates. It also owns a cable network WGN America.
Among the broadcaster stocks, NXST stock may be one of the better choices. As a Seeking Alpha commentator noted last month, with longtime CEO Perry Sook still at the helm, it has “best-in-class management” among broadcasters. Despite TV broadcasting being considered a “dinosaur” business, Sook has consistently found creative new ways to monetize.
He’s also been successful with mergers and acquisitions (M&A), pursuing deals that have for the most part paid off for investors. Best of all, you can buy this stock right now at a low valuation, with a forward P/E of 8.1. While down only slightly from its highs compared to the other oversold value stocks mentioned here, the current valuation is likely far too low.
New York Community Bancorp (NYCB)
Back in June, I included New York Community Bancorp (NYSE:NYCB) on a list of value stocks trading below book value. Shares in this regional bank continue to trade at a meaningful discount to book value.
However, while it could continue to trade sideways in the short-term, NYCB stock continues to have a solid catalyst, with its pending deal to merge with Flagstar Bancorp (NYSE:FBC). The Flagstar deal could in time do wonders for its operating performance. In turn, this would enable this undervalued stock — currently at a forward P/E of 7.1 times — to move higher on multiple expansions.
Along with its low valuation, and upside potential, New York Community Bancorp is also a high-yield stock. Its forward dividend yield currently comes in at 7.22%. With enough earnings coverage to maintain it, you could collect this high payout while waiting for shares to make a recovery.
Oversold Value Stocks: Paramount Global (PARA)
Streaming stocks can’t catch a break these days. “Pure play” streaming stocks like Netflix (NASDAQ:NFLX) remain far past their past highs. “Old media” companies like Paramount Global (NASDAQ:PARA), which are trying to pivot towards an all-streaming future, have also fared badly.
At today’s prices, PARA stock trades for just 9.33 times earnings. This valuation may be overly discounting future results. Yes, a moderate amount of earnings declines are expected in 2023, from $2.58 per share this year, to $1.99 per share next year.
Still, earnings could bounce back, and continue to grow, if its success with streaming properties (Paramount+, PlutoTV) continues. The market is pessimistic that growth with these “new media” properties will make up for the decline of its “old media” properties like cable TV networks. If it can prove the skeptics wrong, this hard-hit stock could make a big comeback.
Walgreens Boots Alliance (WBA)
Pharmacy giant Walgreens Boots Alliance (NASDAQ:WBA) has a recession-resistant business. With this, it’s surprising that the stock, which has fallen by around 26% since the beginning of the year, has dropped to its current super-low valuation.
At present, WBA stock trades for just 8.1 times forward earnings. It also offers a high dividend yield of about 5%. Admittedly, while the pharmacy trade is less cyclical than other industries, the company is dealing with a post-pandemic hangover. As InvestorPlace’s William White reported June 30, it’s seen a big drop in earnings year-over-year (or YOY).
Unlike last year, Walgreen’s doesn’t have the Covid-19 vaccination wave helping to boost results. Nevertheless, as earnings normalize due to the “return to normal,” appreciation by the market for this stock could return. Perhaps not in a big way. Maybe though, in a way that results in strong returns for investors locking down a position at its current price.
Oversold Value Stocks: Warner Bros. Discovery (WBD)
Like with Paramount Global, Warner Bros. Discovery is another situation where investors are bearish in an old media company’s streaming transformation. This company was created when AT&T (NYSE:T) spun off its media business, and reverse-merged it into Discovery Inc.
Debuting at $24.08 per share when the deal completed in April, WBD stock has since fallen more than 40%, to around $14.60 per share. Value investors who bought it a few months ago thinking it was a bargain have found themselves with a value trap. With this in mind, you may think this is one of the oversold value stocks to stay away from.
But while sentiment has become more bearish for shares, that doesn’t mean the company’s turnaround has a lower chance of happening. It could pleasantly surprise the market, by successfully growing its own streaming platforms (Discovery+, HBOMax), and increasing its overall profitability.
On the date of publication, Thomas Niel 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.