In this article, we will take a detailed look at the 12 Best Depressed Stocks To Buy in 2024.
JPMorgan Chief Jamie Dimon, in his latest letter to shareholders, has warned that the real odds of soft landing a quite low when compared to market expectations. Dimon believes stock valuations are still high, and with geopolitical tensions rising and government spending staying high, investors should expect a higher for longer scenario where interest rates could spike to as much as 8%. Dimon also said that the market’s fixation around short-term interest rates and their impact on inflation is not rational since small changes in interest rates today won’t impact inflation in the long run as much as people are anticipating. Dimon also said that while the economy looks in great shape today, he’s seeing many inflationary forces in the long term:
“All of the following factors appear to be inflationary: ongoing fiscal spending, remilitarization of the world, restructuring of global trade, capital needs of the new green economy, and possibly higher energy costs in the future (even though there currently is an oversupply of gas and plentiful spare capacity in oil) due to a lack of needed investment in the energy infrastructure. In the past, fiscal deficits did not seem to be closely related to inflation. In the 1970s and early 1980s, there was a general understanding that inflation was driven by “guns and butter”; i.e., fiscal deficits and the increase to the money supply, both partially driven by the Vietnam War, led to increased inflation, which went over 10%. The deficits today are even larger and occurring in boom times — not as the result of a recession — and they have been supported by quantitative easing, which was never done before the great financial crisis. Quantitative easing is a form of increasing the money supply (though it has many offsets). I remain more concerned about quantitative easing than most, and its reversal, which has never been done before at this scale.”
Does Buying Undervalued Stocks Beat the Market?
It’s not only Dimon who’s concerned about valuations. Several analysts and investors have warned that the AI-led rally, while not completely without legs, has gone too far and pushed valuations of many stocks beyond acceptable levels. While skeptics are expecting a pullback, long-term investors see the coming weeks as a strong buying opportunity. After all, piling into stocks when they are trading at attractive and cheap valuations and holding them for longer periods of time is the only strategy that has worked for billionaires like Warren Buffett. In a 2013 report, Fidelity Investments shared some data showing the importance of buying cheap stocks. The report said that over the past 25 years, stocks in the lowest valuation decile of the Russell 1000® Index by P/E ratios delivered 400 points of average annual outperformance relative to the broad market. From December 1987 through June 2013, on a cumulative basis, the returns of a $100 investment in a hypothetical equal-weighted portfolio of stocks in the cheapest decile would be 2.5x better than the returns of the broader market.
Bull Market is Not Over
Irrespective of the short-term inflation reading and jobs reports, long-term investors always recommend buying because over the long term the stock market tends to grow. And many experts also believe the bull market is not over yet, albeit with some temporary selloffs on the horizon. Jeremy Siegel, Wharton School finance professor, on March 27 talked to CNBC and said that he would not be surprised to see this bull market continuing. He said inflation is going to come down. Siegel also said that projected earnings for the next 12 months are surprisingly going higher, which for him is a strong indicator that the economy is resilient.
When asked whether no rate cuts in 2024 could be a possibility, the professor said the scenario is possible but not likely. He said earnings and economic strength is more important for stocks than rate cuts. He also thinks people are going to buy stocks for earnings instead of timing the market based on rate cuts. Siegel also said that the market is trading at 21 times forward earnings and even though that’s not cheap per se, it’s not something that should be avoided by any long-term investor.
Methodology
For this article we first used a stock screener to identify stocks that have lost about 30%+ so far this year. From these companies we chose 12 stocks with the highest number of hedge fund investors. Some top names in the list include Charter Communications Inc. (NASDAQ:CHTR), Starbucks Corp. (NASDAQ:SBUX) and Gilead Sciences, Inc. (NASDAQ:GILD). Why do we pay attention to what hedge funds are doing? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
12. Calix Inc (NYSE:CALX)
Number of Hedge Fund Investors: 26
California-based telecom company Calix Inc (NYSE:CALX) is one of the best depressed stocks to buy now according to hedge funds. The stock has lost about 44% in value over the past one year. Insider Monkey’s database of 933 hedge funds and their holdings shows that 26 funds had stakes in Calix Inc (NYSE:CALX) as of the end of 2023. In January the stock plunged amid soft guidance. During the fourth quarter, Calix Inc’s (NYSE:CALX) adjusted EPS came in at $0.43, beating estimates by $0.07. Revenue in the quarter jumped 8.3% year over year to $264.73 million, beating estimates by $2.11 million.
11. Sage Therapeutics Inc (NASDAQ:SAGE)
Number of Hedge Fund Investors: 28
Brain health medicine company Sage Therapeutics Inc (NASDAQLSAGE) ranks 11th in our list of the best depressed stocks to invest in according to hedge funds. The stock is down about 60% over the past 12 months. In February Sage Therapeutics Inc (NASDAQLSAGE) posted Q4 results, which show that its GAAP EPS in the period came in at $0.55 beating estimates by $0.76. Revenue totaled $77.97 million, surpassing estimates by $16.99 million.
A total of 28 funds in Insider Monkey’s database had stake in Sage Therapeutics Inc (NASDAQLSAGE) as of the end of the last quarter of 2023.
Aristotle Large Cap Growth Strategy made the following comment about Sage Therapeutics, Inc. (NASDAQ:SAGE) in its Q3 2023 investor letter:
“We sold Sage Therapeutics, Inc. (NASDAQ:SAGE) following results of the company’s new drug application for Zuranalone that was approved in Post Partem Depression (PPD), but not major depressive disorder (MDD). The complete response letter (CRL) on MDD stated that the company would need to complete additional trials to prove the efficacy and durability in MDD, so they are evaluating next steps along with Biogen. Sage was unable to say how committed they or Biogen would be to funding additional studies at this point. Given the uncertainty surrounding the company, we decided to exit the position.”
10. Axcelis Technologies Inc (NASDAQ:ACLS)
Number of Hedge Fund Investors: 28
Axcelis Technologies Inc (NASDAQ:ACLS) makes ion implantation and other processing equipment used in the fabrication of semiconductor chips. The stock has lost about 17% in value over the past one year. In February Axcelis Technologies Inc (NASDAQ:ACLS) posted Q4 results. GAAP EPS in the period totaled $2.15, surpassing estimates by $0.11. Revenue jumped 16.6% year over year to $319.29 million, beating estimates by $11.66 million.
Out of the 933 funds in Insider Monkey’s database, 28 funds reported having stakes in Axcelis Technologies Inc (NASDAQ:ACLS). The most significant stake in Axcelis Technologies Inc (NASDAQ:ACLS) is owned by Israel Englander’s Millennium Management which owns a $66 million stake in Axcelis Technologies Inc (NASDAQ:ACLS).
9. Americold Realty Trust Inc (NYSE:COLD)
Number of Hedge Fund Investors: 31
Temperature-controlled facilities and infrastructure provider Americold Realty Trust Inc (NYSE:COLD) ranks ninth in our list of the best depressed stocks hedge funds are investing in. As of the end of 2023, a total of 31 hedge funds reported owning stakes in Americold Realty Trust Inc (NYSE:COLD). The most significant stake in Americold Realty Trust Inc (NYSE:COLD) is owned by Scott W. Clark’s Darlington Partners Capital which owns a $149 million stake in Americold Realty Trust Inc (NYSE:COLD).
In addition to COLD, investors are also buying Charter Communications Inc. (NASDAQ:CHTR), Starbucks Corp. (NASDAQ:SBUX) and Gilead Sciences, Inc. (NASDAQ:GILD) on the dip.
8. BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX)
Number of Hedge Fund Investors: 32
Late-stage biotech company BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) is working on treatments for rare diseases. The stock is down 46% over the past one year.
Insider Monkey’s database of 933 hedge funds shows that 32 hedge funds reported owning stakes in BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) as of the end of the fourth quarter of 2023.
7. Peloton Interactive Inc (NASDAQ:PTON)
Number of Hedge Fund Investors: 36
Once a Wall Street darling, Peloton Interactive Inc (NASDAQ:PTON) shares have fallen sharply amid growth challenges. The stock fell to a new low in February after Peloton Interactive Inc (NASDAQ:PTON) posted Q2 results and its CEO highlighted growth challenges. However, Citi gave a Buy rating to the stock at the time, saying it was seeing improvement in engagement and subscribers.
A total of 36 funds in Insider Monkey’s database had Peloton Interactive Inc (NASDAQ:PTON) shares in their portfolios.
6. Lamb Weston Holdings Inc (NYSE:LW)
Number of Hedge Fund Investors: 46
American food processing company Lamb Weston Holdings Inc (NYSE:LW) shares have lost about 22% over the past one year. Lamb Weston Holdings Inc (NYSE:LW) recently posted quarterly results which saw its income miss estimates. Lamb Weston Holdings Inc’s (NYSE:LW) management said the transition to a new ERP system caused some issues which reduced the visibility of finished goods inventories located at distribution centers. This impacted business in the period.
Like Charter Communications Inc. (NASDAQ:CHTR), Starbucks Corp. (NASDAQ:SBUX) and Gilead Sciences, Inc. (NASDAQ:GILD), LW is also a buy-the-dip stock according to hedge funds.
A total of 46 hedge funds tracked by Insider Monkey had stakes in Lamb Weston Holdings Inc (NYSE:LW).
The London Company SMID Cap Strategy made the following comment about Lamb Weston Holdings, Inc. (NYSE:LW) in its Q3 2023 investor letter:
“Lamb Weston Holdings, Inc. (NYSE:LW) – LW underperformed after the company reported lower volumes and provided a cautious outlook. This sparked fears the industry could have too much capacity as volumes slow. However, management has been clear the majority of the lower volume for LW has been intentional by shedding lower margin contracts. On a positive note, the fry attachment rate remained high. We remain attracted to LW’s market share, pricing power, and industry tailwinds.”
5. Biogen Inc (NASDAQ:BIIB)
Number of Hedge Fund Investors: 51
Biogen Inc (NASDAQ:BIIB) shares are down 27% over the past one year. Barron’s recently pointed out that BIIB is one of the stocks with significant upside potential, as its average price target set by Wall Street is $299.21, while its current price stands at $201.
4. Liberty Broadband Corp Series C (NASDAQ:LBRDA)
Number of Hedge Fund Investors: 53
Liberty Broadband Corp Series C (NASDAQ:LBRDA) shares are down about 35% over the past one year. As of the end of the fourth quarter of 2023, 53 hedge funds had stakes in Liberty Broadband Corp Series C (NASDAQ:LBRDA).
Meridian Hedged Equity Fund stated the following regarding Liberty Broadband Corporation (NASDAQ:LBRDA) in its fourth quarter 2023 investor letter:
“Liberty Broadband Corporation (NASDAQ:LBRDA) is a holding company that owns interests in several cable businesses, primarily in the United States. Most of Liberty Broadband’s value (about 90%) comes from its large stake in Charter Communications, a broadband provider with 32 million customers across 41 states. Charter’s stock underperformed after missing subscriber growth expectations. Management signaled a likelihood of continued softness through the remainder of 2023. The company also announced $1 billion of additional capital expenditures, which was unwelcome news for many investors. Liberty Broadband has historically traded at a discount to its net asset value, which continues today. We estimate that the business trades as much as 30% below fair value and presents an opportunity to own a quality asset at a sizeable discount. Our long position in Liberty Broadband remained based on the consistent discount to net asset value and Charter’s underlying strengths, even as Charter manages through current industry dynamics.”
3. Gilead Sciences, Inc. (NASDAQ:GILD)
Number of Hedge Fund Investors: 55
Despite having lost about 16% over the past one year, Gilead Sciences, Inc. (NASDAQ:GILD) remains one of the most famous stocks among hedge funds. Insider Monkey’s database shows that 55 hedge funds had stakes in Gilead Sciences, Inc. (NASDAQ:GILD) as of the end of 2023.
In its fourth quarter 2023 investor letter, ClearBridge Dividend Strategy stated the following regarding Gilead Sciences, Inc. (NASDAQ:GILD):
“In the second half of 2023 — as we were selling low-growth, high-multiple stocks and taking advantage of oversold conditions in infrastructure, real estate and utilities — we also found opportunities in overlooked areas of health care. After adding Gilead Sciences, Inc. (NASDAQ:GILD) in the third quarter, we bought AstraZeneca in the fourth quarter. Each of these stocks present distinct investment cases, but both are reasonably valued and have limited patent expiry or pipeline risk. Gilead’s strength comes from its dominant franchise in HIV. It offers lower growth, but it yields nearly 4% and trades at 11x earnings. AstraZeneca possesses a diversified portfolio of pharmaceuticals, which should deliver double-digit earnings growth, yet it trades at just 16x earnings. These stocks were underwritten individually, but collectively we like the idea of increasing our exposure to defensive and growing health care names at below-market multiples.”
2. Starbucks Corp. (NASDAQ:SBUX)
Number of Hedge Fund Investors: 59
Wells Fargo recently reiterated an Overweight rating on Wells Fargo with a $105 price target, as Starbucks Corp. (NASDAQ:SBUX) expects menu innovation, higher prices, along with some other factors, to boost the stock in the second half of 2024.
A total of 59 funds tracked by Insider Monkey had stakes in the coffee giant Starbucks Corp. (NASDAQ:SBUX) as of the end of 2023.
RiverPark Advisors made the following comment about Starbucks Corporation (NASDAQ:SBUX) in its Q3 2023 investor letter:
“Starbucks Corporation (NASDAQ:SBUX): SBUX is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 83 markets. Through its more than 36,000 global stores (roughly 50% operated and 50% licensed) the company offers handcrafted coffee, tea and other beverages and a variety of food items. SBUX also sells a variety of packaged coffee and tea products and licenses its trademarks through other channels such as grocery and foodservice through a Global Coffee Alliance with Nestlé. In addition to its flagship Starbucks Coffee brand, the company sells goods and services under the brands Teavana, Seattle’s Best Coffee, Ethos, Starbucks Reserve and Princi.
SBUX’s recently appointed CEO (March 2023), Narasimhan Laxman, reiterated the company’s long-term plans for 10-12% revenue growth and 15-20% EPS growth while reporting fiscal 3Q23 earnings. Revenue will be driven by a combination of factors including unit growth, higher food “attach” rates (more food sold per cup of coffee), equipment innovation to speed throughput, and delivery expansion. In addition to the leverage of higher revenue across the company’s fixed asset base, SBUX sees margin expansion from supply chain management opportunities and procurement efficiencies. We initiated a small position in August.”
1. Charter Communications Inc. (NASDAQ:CHTR)
Number of Hedge Fund Investors: 69
Charter Communications Inc. (NASDAQ:CHTR) shares are down 23% over the past one year. Last month, Bernstein increased its rating for the stock to Outperform from Market Perform, with a price target of $370.
Bernstein analysts think Charter Communications Inc.’s (NASDAQ:CHTR) valuation is now attractive and they see a recovery throughout 2024 and 2025.
Bernstein’s revised outlook for Charter Communications Inc. (NASDAQ:CHTR) includes a cautious yet optimistic stance.
Here is what Weitz Conservative Allocation Fund has to say about Charter Communications, Inc. (NASDAQ:CHTR) in its Q3 2023 investor letter:
We swapped the Fund’s Liberty Broadband Corporation (NASDAQ:LBRDK) shares back to Charter Communications, Inc. (NASDAQ:CHTR) (Charter is by far Liberty Broadband’s largest asset), and the combined position was the most notable quarterly contributor. Investor sentiment around broadband’s competitive position became less negative, and the stocks rebounded nicely from what we considered oversold levels.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also look at the 15 Best Energy Stocks To Buy Now and the Centi-Billionaire Bill Gates’ Top 15 Dividend Stocks.
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Disclosure. None. 12 Best Depressed Stocks To Buy in 2024 was initially published on Insider Monkey.
