In this article, we discuss the 5 important value stocks that are losing value in 2022. If you want to read about some more stocks that are losing value in 2022, go directly to These 15 Important Stocks are Losing Value in 2022.
5. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 65
PE Ratio: 15.06
YTD Decline in Share Price as of June 15: 14.52%
Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer. As interest rates rise, home prices have gone up as well, slowing down the pace of home improvement and resulting in a cooling of the real estate market. Although the company beat market estimates on earnings per share in the recent quarterly results, it missed sales estimates, resulting in a revenue miss as well. The firm blamed cold weather for the sales miss, saying it impacted outdoor sales.
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 was achievable.
At the end of the first quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Lowe’s Companies, Inc. (NYSE:LOW), compared to 72 in the preceding quarter worth $6.8 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.”
4. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 66
PE Ratio: 15.06
YTD Decline in Share Price as of June 15: 30.91%
Cisco Systems, Inc. (NASDAQ:CSCO) makes and sells networking and other products. On June 6, the company announced that it would be rolling out a new strategy for the security cloud business. As part of the new strategy, the firm expects to offer enhanced threat prevention, detection, response and remediation at scale.
On May 19, Jefferies analyst George Notte 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 the business of the firm.
At the end of the first quarter of 2022, 66 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Cisco Systems, Inc. (NASDAQ:CSCO), compared to 57 in the previous quarter worth $3.4 billion.
Here is what Hayden Capital has to say about Cisco Systems, Inc. (NASDAQ:CSCO) in its Q1 2022 investor letter:
“During the height of the tech bubble, Cisco’s stock peaked at ~$80 in March 2000, reaching up to a $500BN+ valuation (~26x Price / Sales, with ~17% operating margins or 156x operating profits). However, by the time it bottomed in September 2002, shares were trading at just ~$8.60 per share (~3.2x Price / Sales, ~21x operating profits). A little over a year later, the share price had doubled to ~$20, but then continued to trade around those levels in a range for the next 10 years.
So why were Amazon and Mercado Libre able to recover so quickly from their large draw-downs, while Cisco’s stock price remained anemic?
It seems the answer is in their differing growth profiles in the years afterwards. For example, Cisco Systems, Inc. (NASDAQ:CSCO) revenues were $18.9BN in 2000, $22.3BN in 2001, $18.9BN in 2002, $18.9BN in 2003, and $22.0BN in 2004. By contrast, Amazon was able to grow its business by ~120% in the 3 years after the stock bottomed, and Mercado Libre grew by ~118% in the following 3 years. For Cisco Systems, Inc. (NASDAQ:CSCO), it wasn’t until 2012 (11 years later) that revenues managed to double (to $46BN) from its original peak. Compare this to Amazon, who during those same 11 years, managed to grow its business 22x.”
3. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 72
PE Ratio: 23.29
YTD Decline in Share Price as of June 15: 18.98%
The Procter & Gamble Company (NYSE:PG) markets branded consumer packaged goods. On April 20, the firm posted earnings for the third fiscal quarter, reporting earnings per share of $1.33, beating market estimates by $0.04. The revenue over the period was $19.4 billion, up over 7% compared to the revenue over the same period last year and beating estimates by $710 million. The firm also raises sales growth outlook to up to 5% for 2022 from previous 4%.
On June 1, Deutsche Bank analyst Steve Powers maintained a Buy rating on The Procter & Gamble Company (NYSE:PG) stock and lowered the price target to $171 from $177, noting that the consumer products space had outperformed in a difficult backdrop in the past few months.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in The Procter & Gamble Company (NYSE:PG) with 9.9 million shares worth more than $1.5 billion.
2. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 79
PE Ratio: 11.00
YTD Decline in Share Price as of June 15: 15.28%
Pfizer Inc. (NYSE:PFE) makes and sells biopharma products. On June 14, a study by Mayo Clinic found that Paxlovid, an antiviral developed by Pfizer, had been successful in COVID-19 patients and resulted in just a few rebound cases. The study was carried out in around 500 coronavirus patients. The results were published in a clinical journal. The patients that took part in the trial were considered at high risk of developing severe disease because of existing health conditions.
On May 23, SVB Leerink analyst David Risinger initiated coverage of Pfizer Inc. (NYSE:PFE) stock with a Market Perform rating and a price target of $55, appreciating the initiatives of the management of the firm to boost innovation.
At the end of the first quarter of 2022, 79 hedge funds in the database of Insider Monkey held stakes worth $4 billion in Pfizer Inc. (NYSE:PFE), compared to 83 in the preceding quarter worth $5 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Pfizer Inc. (NYSE:PFE) was one of them. Here is what the fund said:
“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer Inc. (NYSE:PFE) vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.
What we did not account for, however, was vaccine hesitancy and the risk of further infection waves. As a result, the first variant wave, Delta, was a negative surprise to both the market and our team. When the risk surfaced, we immediately updated our probability-driven models and debated how we should react. The resulting conclusion was that the recovery would be delayed and that we should reduce our exposure quickly, subsequently targeting the most aggressive recovery stocks such as cruise lines. We again acted swiftly and decisively to the positive surprise that Pfizer Inc. (NYSE:PFE) had delivered a high-efficacy antiviral COVID-19 pill. This pill should greatly reduce COVID-19 severity risks globally, increasing the probability of a global travel recovery in 2022. While this is still true, the emergence of the highly mutated Omicron variant set off another infection wave which spurred us to again act quickly and further reduce our risk exposure. This back-and-forth may sound exhausting, but it highlights our compulsion to act if we determine a surprise has a large enough impact on the probabilities that power our valuation-driven investment cases.”
1. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 89
PE Ratio: 19.92
YTD Decline in Share Price as of June 15: 15.31%
Union Pacific Corporation (NYSE:UNP) is a transportation firm based in Nebraska. On May 12, the firm declared a quarterly dividend of $1.30 per share, an increase of more than 10% from the previous dividend of $1.18. The forward yield was 2.3%. The company is one of the reliable dividend players in the transportation industry with a history stretching back more than three decades. Over the last six years, these payouts have grown consistently.
On May 26, Evercore ISI analyst Jonathan Chappell downgraded Union Pacific Corporation (NYSE:UNP) stock to In Line from Outperform with a price target of $245, noting that the “cyclical sector is not immune to slowdowns in economic activity”.
At the end of the first quarter of 2022, 89 hedge funds in the database of Insider Monkey held stakes worth $7 billion in Union Pacific Corporation (NYSE:UNP), up from 59 in the preceding quarter worth $5.6 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Union Pacific Corporation (NYSE:UNP) was one of them. Here is what the fund said:
“Despite these mixed emerging growth results, the ClearBridge Global Growth Strategy outperformed the benchmark due to resilience among our secular and structural growth holdings. These consistent growers were complemented by solid contributions from structural holdings including Union Pacific Corporation (NYSE:UNP).”
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