In this article, we discuss 10 52-week low stocks with upside potential.
United States (US) President Joe Biden recently admitted that the US economy had problems and warned of a haul before the government could bring soaring prices under control. High inflation and rising interest rates have increased concerns that the US economy might sink into a recession, with analysts at Goldman Sachs, Moody’s, and Deutsche Bank all warning of a looming slowdown. However, Biden appeared to play down that risk during a visit to Japan, affirming that “internal growth and strength” would overcome problems.
As many prominent stocks like Alphabet Inc. (NASDAQ:GOOG), Wells Fargo & Company (NYSE:WFC), and Lowe’s Companies, Inc. (NYSE:LOW) fall near their 52-week lows, there are signs that the prices may be bottoming out. Brian Deese, the director of the National Economic Council, recently told Fox News that the higher interest rates pointed to an economy in transition that was moving from record high growth rates to more stable and resilient growth. Deese urged the market to give the Federal Reserve more time to sort out the situation.
In mid-May, analysts at Goldman Sachs revised their growth forecasts for the second quarter to 2.5% annualized, blaming higher prices and continued supply chain disruptions as some of the main reasons behind the revision. In the first quarter, the economy has already contracted by around 1.4% amid a large trade imbalance and a reduction in inventory purchases. The gloomy outlook has led to a mass selloff at the market which has swept everyone in its wake, creating mouth-watering valuations in key sectors of the economy.
Our Methodology
The stocks that are trading near their 52-week lows but have upside potential were selected for the list. The business fundamentals and analyst ratings of these firms are also discussed to provide further context. Hedge fund sentiment was included as a classifier as well. Data from around 900 elite hedge funds tracked by Insider Monkey at the conclusion of Q4 2021 was used to quantify the hedge fund sentiment around each stock.
Photo by Austin Distel on Unsplash
52-Week Low Stocks with Upside Potential
10. Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 23
52-Week Low as of May 23: $42.54
Real-Time Share Price as of May 23: $44.24
Unilever PLC (NYSE:UL) operates as a fast-moving consumer goods company. Even as inflation increases operating costs for most companies, Unilever remains well-positioned to weather the storm as it has pricing power in the personal products domain. The company navigated the first few weeks of the Russian war in Ukraine without too much damage to the overall business and has reaffirmed previous guidance for 2022 recently. Higher pricing will improve sales and nominal profits for the firm and also help reduce leverage.
On March 14, Bernstein analyst Bruno Monteyne upgraded Unilever PLC (NYSE:UL) stock to Market Perform from Underperform but lowered the price target to GBP 3,300 from GBP 3,500, citing valuation as one of the prime reasons behind the upgrade.
At the end of the fourth quarter of 2021, 23 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Unilever PLC (NYSE:UL), compared to 17 in the previous quarter worth $876 million.
Just like Alphabet Inc. (NASDAQ:GOOG), Wells Fargo & Company (NYSE:WFC), and Lowe’s Companies, Inc. (NYSE:LOW), Unilever PLC (NYSE:UL) is one of the stocks that elite investors are monitoring as a potential investment during a bear market.
In its Q4 2021 investor letter, Fundsmith LLP, an asset management firm, highlighted a few stocks and Unilever PLC (NYSE:UL) was one of them. Here is what the fund said:
“Unilever PLC (NYSE:UL) seems to be labouring under the weight of a management which is obsessed with publicly displaying sustainability credentials at the expense of focusing on the fundamentals of the business. The most obvious manifestation of this is the public spat it has become embroiled in over the refusal to supply Ben & Jerry’s ice cream in the West Bank. However, we think there are far more ludicrous examples which illustrate the problem. A company which feels it has to define the purpose of Hellmann’s mayonnaise has in our view clearly lost the plot. The Hellmann’s brand has existed since 1913 so we would guess that by now consumers have figured out its purpose (spoiler alert — salads and sandwiches). Although Unilever PLC (NYSE:UL) had by far the worst performance of our consumer staples stocks during the pandemic we continue to hold the shares because we think that its strong brands and distribution will triumph in the end.”
9. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Holders: 55
52-Week Low as of May 23: $165.34
Real-Time Share Price as of May 23: $172.65
United Parcel Service, Inc. (NYSE:UPS) provides letter and package delivery services. In late April, the company posted earnings for the first quarter of 2022, reporting earnings per share of $3.05, beating estimates by $0.16. The revenue over the period was $24.4 billion, topping expectations by $600 million. The company also doubled its share repurchase program for 2022, taking the target to $2 billion for the full year. UPS has consistently maintained or increased its dividend each year since 1999 and recently declared a quarterly dividend of $1.52 per share.
On April 27, Oppenheimer analyst Scott Schneeberger maintained an Outperform rating on United Parcel Service, Inc. (NYSE:UPS) stock and lowered the price target to $217 from $249, noting the firm “continued to perform well despite numerous macro challenges”.
Among the hedge funds being tracked by Insider Monkey, New York-based Renaissance Technologies is a leading shareholder in United Parcel Service, Inc. (NYSE:UPS) as of Q1 2022, with 1.1 million shares worth more than $249 million.
In its Q4 2021 investor letter, Saturna Capital, an asset management firm, highlighted a few stocks and United Parcel Service, Inc. (NYSE:UPS) was one of them. Here is what the fund said:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. Despite the share price decline, it remains expensive with modest growth. We sold our position in United Parcel. The United Parcel Service, Inc. (NYSE:UPS) sale was premature, and we may re-engage given an opportunity.”
8. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 57
52-Week Low as of May 23: $66.72
Real-Time Share Price as of May 23: $69.02
Oracle Corporation (NYSE:ORCL) provides information technology solutions to businesses. In the latest quarterly results, the company posted the highest level of organic revenue growth since it began a transition to the cloud. The firm is also in the final stages of the blockbuster purchase of health firm Cerner in a deal worth $28 billion. The company remains one of the most reliable earners in the software space and the decline in stock price is favorable compared to the freefall in the software sector overall.
On March 29, investment advisory Exane BNP Paribas upgraded Oracle Corporation (NYSE:ORCL) stock to Neutral from Underperform with a price target of $79. Analyst Stefan Slowinski issued the ratings update.
At the end of the fourth quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $4 billion in Oracle Corporation (NYSE:ORCL), up from 56 in the preceding quarter worth $3.4 billion.
Here is what ClearBridge Investments has to say about Oracle Corporation (NYSE:ORCL) in its Q3 2021 investor letter:
“While the information technology (IT) sector in the benchmark stalled amid rising rates, our holdings outperformed in relative terms, helped in part by a strong quarter from Oracle Corporation (NYSE:ORCL), the dominant provider of on-premise database software for large enterprises globally and an increasingly viable cloud competitor. Solid quarterly results, raised guidance, healthy underlying metrics and an attractive valuation contributed to strong performance during the period.”
7. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 57
52-Week Low as of May 23: $41.02
Real-Time Share Price as of May 23: $43.18
Cisco Systems, Inc. (NASDAQ:CSCO) makes and sells networking and other products. The firm has several advantages over peers in the marketplace, including a large customer network, the long-term demand for networking products, the leading share of the firm in the networking space, the backlog for products and services which is at an all-time high, as well as a solid dividend track record. Over the past five years, the company has generated over $40 billion in free cash flows, which represents nearly 19% of the market cap.
On May 19, Jefferies analyst George Notter maintained a Buy rating on Cisco Systems, Inc. (NASDAQ:CSCO) stock and lowered the price target to $52 from $65, noting that it was “a bit early for economic pressures to filter through to their business”.
At the end of the fourth quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $3.4 billion in Cisco Systems, Inc. (NASDAQ:CSCO), compared to 63 in the previous quarter worth $3.9 billion.
Here is what ClearBridge Investments has to say about Cisco Systems, Inc. (NASDAQ:CSCO) in its Q3 2021 investor letter:
“We reinvested a portion of the proceeds into existing holding Cisco Systems, Inc. (NASDAQ:CSCO), which also has highly valuable technology and an improving secular growth story with its leading position in core networking hardware, as well as in its growing software and services business. Cisco Systems, Inc. (NASDAQ:CSCO) has refocused on winning share in the large and growing hyperscale market and has been investing aggressively in R&D to support growth. We believe Cisco has found new legs after previously ceding some growth opportunities in cloud while maintaining its strong presence in the carrier and enterprise markets. Cisco Systems, Inc. (NASDAQ:CSCO) boasts a strong balance sheet and accelerating multiyear growth while trading at a modest multiple of earnings.”
6. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 63
52-Week Low as of May 23: $117.27
Real-Time Share Price as of May 23: $120.68
Walmart Inc. (NYSE:WMT) operates as a retail firm. The stock has lost value in the past few weeks after the company posted disappointing earnings for the first quarter of 2022 and did not announce a positive guidance update. However, despite recent underperformance, the company remains one of the best retail stocks on the market, especially in light of upcoming inflation, as it can withstand price pressures better than peers. The company is also tapping into alternative revenue streams like digital advertising to complement growth in the food business.
On May 18, BMO Capital analyst Kelly Bania maintained an Outperform rating on Walmart Inc. (NYSE:WMT) stock and lowered the price target to $165 from $170, underlining that the firm was a “highly attractive global retailer with difficult-to-replicate scale and strong price positioning”.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Walmart Inc. (NYSE:WMT), with 5 million shares worth more than $729 million.
Alongside Alphabet Inc. (NASDAQ:GOOG), Wells Fargo & Company (NYSE:WFC), and Lowe’s Companies, Inc. (NYSE:LOW), Walmart Inc. (NYSE:WMT) is one of the stocks on the radar of elite hedge funds amid rising market volatility.
5. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 72
52-Week Low as of May 23: $40.31
Real-Time Share Price as of May 23: $41.58
Intel Corporation (NASDAQ:INTC) makes and sells semiconductor products. The company has invested heavily in artificial intelligence products in recent months, becoming a leading source of solutions in the AI space. Last year, it launched Gaudi, an AI-powered NPU. This year, it has launched the Gaudi 2, a product that is 2-times faster than the competition. NVIDIA, a rival of Intel, recently claimed that AI represented a $1 trillion market opportunity for chip stocks in the long-term.
In late February, Raymond James analyst Chris Caso upgraded Intel Corporation (NASDAQ:INTC) stock to Market Perform from Underperform without a price target, noting that the path to the three year goals of the firm was “very long and expensive”.
At the end of the fourth quarter of 2021, 72 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Intel Corporation (NASDAQ:INTC), compared to 66 in the previous quarter worth $6.4 billion.
In its Q4 2021 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Intel Corporation (NASDAQ:INTC) was one of them. Here is what the fund said:
“Within technology and communication services, we own a number of online businesses and semiconductor related companies, including Alphabet, Amazon, Intel Corporation (NASDAQ:INTC), Applied Materials and Texas Instruments. Within the realm of high technology, we believe that leadership positions reflect enduring and widening competitive advantages over smaller competitors, with few exceptions. This is because online businesses, as well as semiconductor companies, benefit from economies of scale. An online search and advertising engine will, in general, be more profitable per unit of cost as it grows larger in terms of users and advertising dollars. It is a hub-and-spoke model, in other words, where it is generally not necessary to grow expenses at the same rate that revenues grow beyond a certain threshold. Therefore, returns on capital tend to be higher, the larger and more dominant the online search company is.”
4. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 72
52-Week Low as of May 23: $179.22
Real-Time Share Price as of May 23: $183.54
Lowe’s Companies, Inc. (NYSE:LOW) operates as a home improvement retailer. The firm is increasing earnings per share despite a decline in sales, has improved operating margin over the past three months, and is a sustainable dividend player. The company also continues to generate value through large share buyback programs. Despite a cooling housing market in the US, the firm remains well positioned to expand margins, even with the inflation numbers factored into the equation.
On May 19, Jefferies analyst Jonathan Matuszewski maintained a Buy rating on Lowe’s Companies, Inc. (NYSE:LOW) stock and lowered the price target to $238 from $290, noting that the sales and margin guidance of the firm seemed “achievable”.
At the end of the fourth quarter of 2021, 72 hedge funds in the database of Insider Monkey held stakes worth $6.8 billion in Lowe’s Companies, Inc. (NYSE:LOW), up from 60 in the preceding quarter worth $5 billion.
In its Q4 2021 investor letter, Pershing Square Capital Management, an asset management firm, highlighted a few stocks and Lowe’s Companies, Inc. (NYSE:LOW) was one of them. Here is what the fund said:
“Lowe’s Companies, Inc. (NYSE:LOW) is a high-quality business with significant long-term earnings growth potential
Supportive macroeconomic backdrop
-Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing market
Positioned to grow EPS largely independent of market conditions
-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022
Multi-year business transformation with substantial earnings upside
-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing-Potential to generate high-teens EPS growth over the next several years.
Lowe’s Companies, Inc. (NYSE:LOW) continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”
3. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 84
52-Week Low as of May 23: $32.96
Real-Time Share Price as of May 23: $35.15
Bank of America Corporation (NYSE:BAC) provides banking and financial products. The company has beaten market expectations on earnings consistently for the past eight quarters and remains in a position to take maximum advantage of rising interest rates. The decline in the share price of the firm has baffled analysts, with most attributing the selloff to concerns around a recession. However, the EPS growth estimates for the stock, despite recent uncertainty, continue to hover around 7.5% for the next five years.
On May 3, Oppenheimer analyst Chris Kotowski maintained an Outperform rating on Bank of America Corporation (NYSE:BAC) stock and lowered the price target to $50 from $52, noting that loan growth and rising interest rates were good for the banks even during a recession.
At the end of the fourth quarter of 2021, 84 hedge funds in the database of Insider Monkey held stakes worth $47 billion in Bank of America Corporation (NYSE:BAC), compared to 72 in the previous quarter worth $46 billion.
In its Q1 2022 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and Bank of America Corporation (NYSE:BAC) was one of them. Here is what the fund said:
“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America Corporation (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.
A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).
We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”
2. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 94
52-Week Low as of May 23: $40.73
Real-Time Share Price as of May 23: $42.98
Wells Fargo & Company (NYSE:WFC) is a diversified financial services firm. The company posted earnings for the first quarter of 2022 on April 14, reporting earnings per share of $0.88, beating analyst estimates by $0.07. The revenue over the period was $17.5 billion, down nearly 2.6% year-on-year. The firm attributed credit losses during the time to “the economic impact of the COVID-19 pandemic on the loan portfolios, as well as a decrease in net charge-offs”. On April 25, the firm declared a quarterly dividend of $0.25 per share.
On April 18, Barclays analyst Jason Goldberg kept an Overweight rating on Wells Fargo & Company (NYSE:WFC) stock and raised the price target to $64 from $62, appreciating the net interest income and loan growth outlook of the firm for 2022.
At the end of the fourth quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $6.11 billion in Wells Fargo & Company (NYSE:WFC), compared to 88 the preceding quarter worth $6.18 billion.
In its Q4 2021 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Wells Fargo & Company (NYSE:WFC) was one of them. Here is what the fund said:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund includes Wells Fargo & Company (NYSE:WFC).”
1. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 158
52-Week Low as of May 23: $2,127.46
Real-Time Share Price as of May 23: $2,197.48
Alphabet Inc. (NASDAQ:GOOG) is a diversified technology company. The firm recently announced that it would be doubling production plans for the Pixel smartphone devices, expanding Pixel Pass and subscription services in a bid to widen the customer base of the firm. The plans will help the company reduce traffic acquisition costs. In the next few years, the company could hit 100 million annual smartphone shipments, contributing to the revenue growth of the tech giant that owns and runs the most popular search engine worldwide.
On April 27, Guggenheim analyst Michael Morris kept a Buy rating on Alphabet Inc. (NASDAQ:GOOG) stock and lowered the price target to $3,000 from $3,350, noting that the firm was still viewed as a tech leader in the industry.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG), with 2.9 million shares worth more than $8.5 billion.
In its Q4 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“In contrast, we made a different kind of mistake about a decade ago. Google, now Alphabet Inc. (NASDAQ:GOOG), performed very well for us while we owned it. The company kept outperforming our assumptions and we kept lowering them to be conservative. “Trees do not grow to the sky.” The stock kept going up and our value grew but did not keep pace with the stock. It hit our estimate of fair value and we sold it with a nice gain, patting ourselves on the back. We kept following Alphabet Inc. (NASDAQ:GOOG) and what they actually did over the next several years was roughly double the assumptions we used to value it. Therefore, our value was too conservative, and we sold it too cheaply, missing many years of compounding. Fortunately, we experienced some volatility several years ago that allowed us to purchase Alphabet Inc. (NASDAQ:GOOG) (Google) again with a margin of safety.”
You can also take a peek at 10 Best Stocks for Animal Lovers and 10 Best Nickel Stocks to Buy Now.
Follow Insider Monkey on Twitter
Suggested Articles:
- 10 Best Roth IRA Stocks to Buy According to Reddit
- 10 Best Dividend Stocks for Roth IRA
- 10 Best Money Saving Tips According to Experts
Disclosure. None. 10 52-Week Low Stocks with Upside Potential is originally published on Insider Monkey.
