With the major stock indices trading near record highs, more stocks are trading near their 52-week highs than near their 52-week lows. Roughly three out of five S&P 500 stocks are currently within 10% of their respective 52-week highs. A mere 13 stocks are within 10% of their 52-week lows.
By focusing on this latter group, investors are bound to find bargains—or bear traps, i.e., relatively low-priced stocks that have more downside. Just as a stock at a 52-week high and keep moving higher, a stock near its 52-week low can certainly continue its descent.
So, there's much risk in the so-called 'bottom feeding' strategy. But in some cases, the risk is well worth the potential rewards. Let's take a look at three of those downtrodden 13 stocks that have the best chances of making a comeback.
Is Vertex Pharmaceuticals Stock Oversold?
Last summer Vertex Pharmaceuticals (NASDAQ:VRTX) was trading above $300. But after a pair of 'gap down' events, the stock is back under $200 and has set fresh 52-week lows in three of the last four days.
In October 2020, the specialist in treatments for cystic fibrosis (CF) and other diseases saw its share price drop 23%. This came after the company discontinued the development of VX814, a drug for alpha-1 antitrypsin deficiency (AATD), after patients in the trial suffered increased liver damage risk.
More bad news came earlier this month when Vertex scrapped a plan to move forward with its VX-864 drug candidate. This was a new potential treatment for AATD, a genetic disease that can impact the liver and lungs. So, both drops occurred on account of the Vertex AATD franchise, an area where investors had high expectations—but also overreacted.
Like other large-cap biotechs, Vertex has a diversified portfolio of promising therapeutic candidates including within its key CF program. If the company secures approval for its Trikafta regimen for use with more indications, it estimates it could treat as much as 90% of the approximately 70,000 people worldwide that have CF.
Is Becton Dickinson Stock a Buy?
Becton Dickinson (NYSE:BDX) is trading less than 10% away from its 52-week low of $219.50. The diversified medical supply company came within inches of matching its pre-pandemic high in August 2020. Then a disappointing third quarter earnings report caused a drop that the stock has yet to recover from.
The issues that caused the 9% decline in earnings and 25% drop in earnings per share in Q3 have largely subsided. Much of the poor performance was tied to the fact that many non-critical health care procedures were put on hold due to COVID-19.
The financial results since have reflected a gradual improvement in operating conditions. Fourth quarter 2020 revenues were up 4% and top line growth accelerated to 24% in the most recent quarter. Much of the growth has come from the introduction of COVID-19 products such as the BD Veritor rapid antigen test.
In August 2021, Becton Dickinson is expected to report fiscal 2021 Q3 performance that will face an easy comparison to the COVID-impacted quarter that sunk its stock last year. The current consensus expectation is for EPS of $2.46 which would mean Q3 earnings will have returned to within 20% of pre-pandemic levels.
Results are likely to further strengthen in the back half of the year when medical procedure volumes are expected to recover amid eased hospital restrictions and higher vaccination rates. At 19x forward earnings Becton Dickinson is trading at a sizeable discount to its life sciences peer group. This likely won't be the case later this year.
Is Clorox a Good Defensive Stock?
Let's clean up our list of undervalued 52-week low stocks with Clorox (NYSE:CLX). It is trading at a 12-month low of around $174 after spiking above $230 in February 2021. The consumer products company hasn't produced the same growth it did earlier in the pandemic when people were buying bleach and household cleansers like they were going out of style.
But that doesn't mean Clorox can't still deliver steady growth as it has for the better part of the last 100-plus years. Even as pandemic conditions continue to improve, consumers will continue to buy disinfectants and household essentials like laundry detergent. The company's introduction of new, higher-margin products and expanded distribution should also support bottom line growth in the post-pandemic world.
Of course, a major part of the appeal of Clorox stock is its dividend. The company has increased its dividend in each of the last 45 years making it one of the most prominent members of the S&P Dividend Aristocrats index.
The current 2.6% dividend yield is the highest it has been in about a year and a half. This along with the inexpensive 23x forward P/E multiple are reason to consider this defensive mainstay for a long-term portfolio.
Before you consider The Clorox, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and The Clorox wasn't on the list.
While The Clorox currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.
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