In this article, we discuss the 5 best beaten down stocks to buy today. If you want to read our detailed analysis of these stocks, go directly to the 11 Best Beaten Down Stocks To Buy Today.
5. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 61
Percentage Loss in Share Price over Past Three Months: 23.99%
Roku, Inc. (NASDAQ:ROKU) owns and runs a streaming platform. The company is among a host of growth stocks that have suffered in the post-pandemic economy. The firm beat market predictions on earnings per share in the third quarter results but missed on revenue. Analysts cut their price targets on the stock due to lowered guidance for the coming months as the firm deals with player production and slowed account growth.
However, Roku, Inc. (NASDAQ:ROKU) grew at a solid rate during the pandemic and the skyrocketing advertisement revenues for digital platforms are expected to benefit the company as it deals with this mini-crisis.
At the end of the second quarter of 2021, 61 hedge funds in the database of Insider Monkey held stakes worth $5.6 billion in Roku, Inc. (NASDAQ:ROKU), down from 63 in the preceding quarter worth $3.7 billion.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Roku, Inc. (NASDAQ:ROKU) was one of them. Here is what the fund said:
“For two years running, Roku has now been either the largest or second largest driver of performance in portfolios. When we purchased Roku, obviously we never expected such a phenomenal outcome, so quickly—these things can only be chalked up to luck. However, we do think luck is the residue of design and Roku had all the hallmarks ex ante as the kind of position that could do something wildly spectacular. One of the first signs in seeing Roku’s potential was the sharp contrast between our modeled expectations for the top line of the business and where the consensus expectations were. This was the Shopify setup all over again. By this time, we had added an additional tool to our analytical framework, and this helped further enforce our conviction that not only was it we who were right about where things should go, but also that the very existence of this gap could be a potent source of fuel behind the stock as the world came around to our expectation. Specifically, we had become increasingly comfortable building lifetime value analyses of companies, and notably, when we bought Roku, we were quite confident that with only modest annual increases in average revenue per user (ARPU), and a 5-year average customer lifespan, we were buying the company for its existing customer base and nothing more. In other words, the growth at Roku was entirely free at the prevailing prices we bought into.”
4. Pinterest, Inc. (NYSE:PINS)
Number of Hedge Fund Holders: 63
Percentage Loss in Share Price over Past Three Months: 19.71%
Pinterest, Inc. (NYSE:PINS) owns and runs a visual discovery engine. The company has been operating in a fiercely competitive social media environment for the past few years and the stock was recently buoyed by news that payments giant PayPal was interested in buying the firm. However, the stock slumped by about 12% in a single day in late October after the payments firm clarified it was not pursuing the purchase.
Pinterest, Inc. (NYSE:PINS) has strong fundamentals, recently smashing analyst estimates on earnings for the third quarter, and has been investing heavily in monetization to take advantage of the increased spending on digital platforms. The stock has recovered from the PayPal snub fairly quickly.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Alkeon Capital Management is a leading shareholder in Pinterest, Inc. (NYSE:PINS) with 4.5 million shares worth more than $356 million.
In its Q1 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Pinterest, Inc. (NYSE:PINS) was one of them. Here is what the fund said:
“Pinterest is an operator of a pinboard-style social media website that enables users to create theme-based image collections for events, hobbies, and other personal interests. The firm delivered another quarter of both earnings and forward guidance above investor expectations, sending shares higher. Strength was driven by notable user growth and a return of advertising spending. We remain excited about an increase in video content, new analytics tools for advertisers, and an increasing shift towards ecommerce.”
3. Biogen Inc. (NASDAQ:BIIB)
Number of Hedge Fund Holders: 67
Percentage Loss in Share Price over Past Three Months: 21.75%
Biogen Inc. (NASDAQ:BIIB) is a biotech firm focused on developing therapies for treating neurological and neurodegenerative diseases. The company recently posted an 18% year-on-year decline in total product sales following a drop in sales of several key drugs in the portfolio over the past few months. There are also reports of a rival firm pricing a new Alzheimer’s drug at lower prices than Biogen.
Even if the sale of the new Alzheimer’s drug does not benefit Biogen Inc. (NASDAQ:BIIB) in the long-term, the company still has plenty of pipeline drugs that could propel it forward, including Phase 3 clinical trials for ADUHELM.
At the end of the second quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $3.1 billion in Biogen Inc. (NASDAQ:BIIB), up from 63 in the preceding quarter worth $1.4 billion.
In its Q2 2021 investor letter, Longleaf Partners Fund highlighted a few stocks and Biogen Inc. (NASDAQ:BIIB) was one of them. Here is what the fund said:
“Biogen (52%, 1.24%), a biotechnology company specializing in therapies for the treatment of neurological diseases, contributed in a way that warrants a longer than usual writeup. When we first began buying the company in early January, the stock scored well on all three Business, People and Price criteria, but the range of outcomes was wider than most investments for us. On the business, while the company has had a leading position in neuroscience for decades, it had become a collection of assets that was hard for the stock market to value. This led to most short-term investors focusing on year-over-year (YOY) earnings declines in 2021 and pipeline uncertainty. We focused most on strong cash flows from Biogen’s Multiple Sclerosis franchise, a growing yet hidden biosimilars business, and a pipeline that we believed was actually quite interesting and diversified beyond the manic market focus on Aducanumab, a proposed treatment for Alzheimer’s. On the people front, we also liked what the board and management had been doing (large, discounted repurchases and prudent internal and external investments) and not doing (no big, dumb M&A or unsustainable dividends). Our single point appraisal was around $375/share, but we saw a range at the low end of slightly above $250 if the pipeline totally failed or approaching $500 if the company saw a reasonable amount of pipeline success. We also thought that we were effectively paying a very low double-digit multiple of FCF/share. It is important to note that we were not betting on our science expertise or any other predictions that fall outside our circle of competence. Rather, we used our bottom-up appraisal skills to find a security that was mispriced at that given moment – we had followed the company for over 10 years before our purchase – and that shorter-term investors were afraid to own due to the potential for near-term stock price volatility. We started with a partial position, as we felt the wider-than-usual range of outcomes and uncertainty around the stock could lead to the chance to fill it out at a better price later.
On June 7, the FDA approved Aducanumab (now known as Aduhelm) after a contentious process that has yet to fully play out. The stock shot upward, and our single point value increased to $425. With the stock trading at that level, we exercised our price discipline and sold our position. In this era of “multi-decade-compounders at any price” and given SAM’s history of being long term, it feels weird to be in and out of something so quickly. But it also feels OK to be able to use our appraisal skills to secure a payoff for our long-term clients. The company’s stock price has fallen since our sale, and we will continue to watch the price-to-value (P/V) gap going forward.”
2. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 67
Percentage Loss in Share Price over Past Three Months: 54.44%
Peloton Interactive, Inc. (NASDAQ:PTON) markets interactive fitness products. The firm recently provided guidance for the next fiscal year that fell short of expectations on Wall Street, prompting a downgrade at Argus and a price target decrease at Roth Capital. However, JMP Securities analyst Ronald Josey reiterated an Outperform rating on the stock with a price target of $85, noting the firm was taking advantage of corporate partnerships and would bounce back.
Peloton Interactive, Inc. (NASDAQ:PTON) has also been hit by increased competition from industry giants like Apple and Amazon that are stepping into the health market with blockbuster products. Peloton has lowered prices on key items to keep ahead of the competition.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in Peloton Interactive, Inc. (NASDAQ:PTON) with 8.8 million shares worth more than $1 billion.
In its Q2 2021 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Peloton Interactive, Inc. (NASDAQ:PTON) was one of them. Here is what the fund said:
“Peloton Interactive operates a connected fitness platform offering live and on-demand classes allowing users to exercise at home. The firm’s shares were pressured in the quarter after Peloton announced a voluntary recall for both its legacy treadmill (Peloton Tread+) and its newly-launched base model treadmill (Peloton Tread). The issue surrounding the latter is somewhat troubling, as it appears it may be the result of an engineering flaw. This new treadmill offering was expected to be a key growth driver in the second half of 2021, and this development reduces our confidence in Peloton’s product pipeline. Therefore, we sold the stock.”
1. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders: 78
Percentage Loss in Share Price over Past Three Months: 20.75%
Activision Blizzard, Inc. (NASDAQ:ATVI) is an interactive home entertainment company. Although delays in releases of new versions of some games have hit the stock, the unveiling of the flagship Call of Duty in time for the holiday season will offset some of these concerns. The guidance for the coming months failed to impress analysts at a recent earnings call but the firm did beat expectations on earnings per share by $0.02.
Oppenheimer analyst Andrew Uerkwitz has an Outperform rating on Activision Blizzard, Inc. (NASDAQ:ATVI) stock with a price target of $85. The analyst believes that there is a “leadership vacuum” at the firm which is causing delays to new game releases.
At the end of the second quarter of 2021, 78 hedge funds in the database of Insider Monkey held stakes worth $3.5 billion in Activision Blizzard, Inc. (NASDAQ:ATVI), up from 76 in the preceding quarter worth $3.7 billion.
In its Q1 2021 investor letter, Cooper Investors, an asset management firm, highlighted a few stocks and Activision Blizzard, Inc. (NASDAQ:ATVI) was one of them. Here is what the fund said:
“The portfolio established a position in video game publisher Activision Blizzard. As a watchlist company we have followed Activision for several years. As a reminder the role of the watchlist is to allow us to focus on a select group of companies where we seek to observe important signals around either value latency, industry trends or management behaviour that portend attractive investment propositions.
Technology can often play a disruptive role in content, however video games are a clear beneficiary of technology, both in terms of more immersive and realistic gaming experiences as well as the monetisation opportunities this creates.
In order to benefit from these trends, video game publishers must be owners of unique IP. Activision Blizzard fits this bill perfectly boasting a portfolio which includes franchises such as Call of Duty, World of Warcraft and Diablo just to name a few.
The business is run by CEO Bobby Kotick, who together with Chairman Brian Kelly purchased the foundation assets for the company for US$400k in the early 1990s. Today Activision has a market capitalisation of over US$70bn. Over the last few years Bobby and his management team have refocused resources onto their best IP, with the goal of capitalising on the aforementioned industry tailwinds.
We saw the benefits of this in 2020 with the release of Call of Duty Mobile and Free-to-Play versions (with in game micro transactions) complimenting the traditional core console game. Engagement increased materially and due to the very favourable economics of content publishing, Operating Income more than doubled for the Call of Duty Franchise. Even adjusting for the impact of lockdowns, this is a phenomenal outcome.
Activision has 3-4 key pieces of IP with which they plan to repeat this playbook over the next couple of years. If they can replicate the success of Call of Duty, even in part, we see material upside to the free cash flow power of the business. Further, revenue sources are broadening which will move the profile away from a traditional lumpy annual release cycle of the old video game model towards one of a more recurring nature. This will transition Activision from a publishing to a services business, likely attracting a higher multiple than the current mid-low 20x FCF which is broadly in line with the market. To summarise, we see significant value latency and a pathway to double digit returns over the medium term.”
You can also take a peek at 10 Stocks That Benefit from Global Chip Shortage and 10 Fintech Stocks Redditors are Buying.
