11 Best Depressed Stocks To Invest In

view original post

In this article, we will discuss the 11 best depressed stocks to buy right now. You can skip our comprehensive analysis of these companies, and go directly to 5 Best Depressed Stocks To Invest In.

Overall, 2021 was great for investors. The economy rebounded after the abysmal downfall in 2020, and S&P 500 gained a solid 27%. But some worrying signs remain as we enter a new year, and this has put more emphasis on value stocks for both hedge funds and amateur investors.

Inflation is a big problem heading into 2022. Consumer prices in November increased 6.8% compared to a year before, which is the largest hike in nearly 40 years. The Federal Reserve has announced plans to stop buying bonds sooner than expected, in order to become able to raise interest rates as it tries to deal with rising costs. The threat of Omicron has already seen parts of Europe going back into lockdowns. Labor shortages have led to key industries struggling to find their footing again, and supply chain issues still persist, posing a great hindrance towards a strong, growing economy. If interest rates rise, which the Fed looks set to do, then this will create more pressure on businesses in the United States and beyond.

With all of this uncertainty, it is pertinent to keep an eye out for stocks that have long-term growth potential, and are trading below their intrinsic value, offering a good entry point for investors. Some of the depressed stocks to buy now include Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA), and The Walt Disney Company (NYSE:DIS), among others discussed in detail below.

Our Methodology

We picked companies that show catalysts for long-term growth, are working on innovative products, and boast solid financials and positive analyst ratings. Hedge fund sentiment was derived using Insider Monkey’s database of 867 elite hedge funds.

These are stocks are currently under pressure, offering attractive entry points for long-term investors.

Best Depressed Stocks To Invest In

11. Electronic Arts Inc. (NASDAQ:EA)

Number of Hedge Fund Holders: 53

Share Price (as of January 4): $135.55

Share Price Decline Over the Last Six Months: 6%

Electronic Arts Inc. (NASDAQ:EA) starts off our list of 11 depressed stocks to buy right now. The company makes video games for a range of platforms, and its most popular brands that include FIFA, Battlefield, and Madden NFL. Electronic Arts Inc. (NASDAQ:EA) posted an EPS of $1.73 in the third quarter of 2021, beating estimates by $0.58. The revenue figure of $1.85 billion was above estimates by $97.95 million.

Although video game stocks greatly underperformed in 2021, these headwinds are short-term and transitory and allow for a good buying opportunity. Over the past year, Electronic Arts Inc. (NASDAQ:EA) has strengthened its mobile gaming talent and boasts a very strong pipeline for mobile revenue as compared to before. The firm has also made several long-term service-based initiatives that will allow it to deepen its engagement with players.

On December 6, Citi analyst Jason Bazinet upgraded Electronic Arts Inc. (NASDAQ:EA) to ‘Buy’ from ‘Neutral’, revising the price target to $150 from $160, noting that the company boasts a favorable risk/reward.

As of the end of the third quarter, 53 hedge funds were reported holding Electronic Arts Inc. (NASDAQ:EA) shares, worth a combined value of $1.09 billion. In contrast, 56 hedge funds disclosed ownership of the company’s shares a quarter ago.

10. MercadoLibre, Inc. (NASDAQ:MELI)

Number of Hedge Fund Holders: 68

Share Price (as of January 4): $1,241.89

Share Price Decline Over the Last Twelve Months: 36%

MercadoLibre, Inc. (NASDAQ:MELI) operates the largest e-commerce ecosystem in Latin America, with operations in 18 countries including Brazil, Argentina, and Mexico. The company operates the e-commerce platform Mercado Libre Marketplace, which has been the main talking point of the company, but its growth and profitability will likely draw from its relatively-new fintech operations. As of late, MercadoLibre, Inc. (NASDAQ:MELI) has adopted the strategy of expanding its logistic capabilities supported by its fintech services, and this has provided a competitive hedge for the company.

The company recently lost $24 billion in value after going on a losing streak, shedding around 33% from its November peak. Investors were shaky with concerns over the expansion of rival Shopee in Brazil, but those concerns are overweighed given that MercadoLibre, Inc.’s (NASDAQ:MELI) logistic network is critical to penetrating the South American and Brazilian market.

In December, MercadoLibre, Inc. (NASDAQ:MELI) bought Chilean payment services provider Redelcom, and this will help MercadoLibre, Inc. (NASDAQ:MELI) consolidate its market hold in Latin America. On November 5, Barclays analyst Trevor Young kept an ‘Overweight’ rating on MercadoLibre, Inc. (NASDAQ:MELI) shares, raising the price target to $2,200 from $2,100.

In the third quarter, MercadoLibre, Inc. (NASDAQ:MELI) posted an EPS of $1.92, beating estimates by $0.61. 68 hedge funds were bullish on the company stock in Q3 2021, down from 74 a quarter ago.

Investment firm LRT Capital Management recently published its Q3 2021 investor letter, where it talked about MercadoLibre, Inc. (NASDAQ:MELI). Here’s what the fund said:

Mercadolibre, Inc. (MELI) – the LatAm eCommerce, shipping, and payments company, is now trading at a very attractive valuation – its lowest P/S ratio ever. The concerns here have to do with the recession in Brazil and slowing economic growth throughout the region.”

In addition to Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA), and The Walt Disney Company (NYSE:DIS), MercadoLibre, Inc. (NASDAQ:MELI) is a top stock for investors in 2022.

9. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Holders: 101

Share Price (as of January 4): $156.48

Share Price Decline Over the Last Twelve Months: 11%

The Walt Disney Company (NYSE:DIS) is another depressed stock that provides an excellent buying opportunity. Recently, US House of Representatives Speaker Nancy Pelosi and her husband purchased millions of dollars in call options in many tech names, and The Walt Disney Company (NYSE:DIS) was one of them. The media giant and entertainment giant operates through its segments: Disney Media and Entertainment Distribution (DMED) and Disney Parks, Experiences and Products (DPEP). The company plans to spend $33 billion on content in 2022, in a bid to drive the growth of its Direct-to-Consumer segment which includes streaming platform Disney+. Outlook for the firm’s near-term future looks positive, as subscriber growth is expected to rise on the back of increased spending on content, and a post-pandemic recovery that has led to the reopening of theme parks around the world.

The Walt Disney Company (NYSE:DIS) posted $0.38 in EPS for the third quarter, missing estimates by $0.12. At the end of September, 101 hedge funds reported owning positions in The Walt Disney Company (NYSE:DIS), worth a combined value of $9.4 billion. In comparison, 112 hedge funds held $10.83 billion worth of positions in the company at the end of June.

DIS was in 101 hedge fund portfolios at the end of the third quarter of 2021, compared to 112 funds in the previous quarter. Based on our calculations, The Walt Disney Company (NYSE:DIS) ranks 16th in our list of the 30 Most Popular Stocks Among Hedge Funds.

RiverPark Funds, an investment firm, mentioned The Walt Disney Company (NYSE:DIS) in its second-quarter investor letter. Here’s what it said:

DIS shares declined for the quarter, taking a pause after a big fourth quarter and first quarter stock price advance, as Disney+ subscriber numbers were disappointing to investors. Disney+, the company’s DTC streaming business, had blown past previous subscriber projections, having gone from zero to 104 million in 17 months, but investors were now expecting 109 million subscribers. Management still expects significant continued growth to 230-260 million subscribers in 2024.

DIS is blessed with a deep library of unique content that includes both live sports (providing large, non-time shifted audiences) and incomparable brands including Disney, Marvel, Pixar and Lucasfilm, as well as the ABC network. The company also has a wealth of upcoming new content, expecting over 100 original titles per year, including two new Star Wars spin-off series, 10 Star Wars films, 10 Marvel films, 15 Disney and Pixar films and 15 Disney and Pixar series.

Now that the disruption in its theme park, cruise and theatrical businesses appears to be coming to an end, we believe that Disney is among the best-positioned media companies in the new landscape to combine multi-channel and DTC distribution. We also note that DIS has an extremely strong balance sheet and a growing pool of free cash flow to be used both to return to shareholders and to invest in future opportunities.”

8. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 74

Share Price (as of January 4): $54.73

Share Price Decline in 2022 as of Jan. 8: 1.64%

Pfizer Inc. (NYSE:PFE) is up next on our list of the depressed stocks to buy right now. The biopharmaceutical company is the manufacturer of the popular Pfizer-BioNTech Covid vaccine. On January 4, the firm announced that the US government has agreed to procure an additional 10 million doses of Paxlovid, the firm’s oral pill for Covid which has recently been authorized.

Pfizer Inc. (NYSE:PFE) has consistently outperformed its competition in Covid protection. On December 17, Goldman Sachs analyst Chris Shibutani initiated coverage of Pfizer Inc. (NYSE:PFE) with a ‘Neutral’ rating and a $51 price target.

For the third quarter, Pfizer Inc. (NYSE:PFE) reported earnings per share of $1.34, beating estimates by $0.25. Revenue for Q3 stood at $24.09 billion, exceeding estimates by $1.28 billion.

As of the third quarter, the number of bullish hedge fund bets on Pfizer Inc. (NYSE:PFE) increased to 74 from 67 in the previous quarter. These 74 hedge funds held positions worth $2.66 billion in the company.

Investment firm Saturna Capital mentioned many stocks in its investor letter for the third quarter, and Pfizer Inc. (NYSE:PFE) was one of them. Here’s what the fund said:

“The Fund’s strongest performer during the quarter was pharmaceutical manufacturer Pfizer. The company submitted trial data to the FDA for use of its COVID-19 vaccine for younger children, and it is widely expected that the FDA will approve it. Health authorities also began recommending booster shots of the Pfizer vaccine for select populations, further increasing demand for vaccinations.”

7. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 242

Share Price (as of January 4): $3,340.65

Share Price Decline Over the Last Six Months: 12%

Amazon.com, Inc. (NASDAQ:AMZN) is one of the world’s largest companies. The online retail shopping giant was named among the top internet picks for 2022 by research firm Baird, and top tech picks for 2022 by research firm Evercore ISI’s analyst Mark Mahaney.

Although Amazon.com, Inc. (NASDAQ:AMZN) had a difficult 2021, gaining 7% in comparison to S&P 500’s 27%, the stock is set to grow strongly in 2022, being uniquely positioned to come out of the pandemic as one of the biggest beneficiaries of an accelerated digital transformation. This past holiday season bore great news for retail companies like Amazon.com, Inc. (NASDAQ:AMZN), as retail sales excluding automobiles climbed 8.5% year-over-year from November 1 to December 24, which includes an 11% spike in online sales.

The company’s earnings per share for the third quarter stood at $6.12, falling below estimates by $2.78. Amazon.com, Inc.’s (NASDAQ:AMZN) main driver of growth is its advertising business, which enjoys a cleaner image as compared to rivals Facebook and Google. The higher revenue share of the advertising business will boost margin expansion in the coming quarters.

At the close of the third quarter, 242 out of 867 elite hedge funds tracked by Insider Monkey held shares worth $42.55 billion in Amazon.com, Inc. (NASDAQ:AMZN).

Investment firm Davis Funds talked about Amazon.com, Inc. (NASDAQ:AMZN) in its third-quarter investor letter. Here’s what the fund said:

“E-commerce, online search and advertising, social media and software are another component of the portfolio that have proven, attractive businesses. The online portion of the Fund is currently dominated by such market leaders as Amazon.com. We are attracted to these names based on the size and rapid expansion of their market opportunities globally, their ability to generate and grow new revenue sources through constant innovation, ample operating leverage as they continue to scale and capable, focused, highly competitive leadership teams. If purchased at sensible prices, these types of businesses in our experience can contribute meaningfully to long-term results.”

6. Roblox Corporation (NYSE:RBLX)

Number of Hedge Fund Holders: 50

Share Price (as of January 4): $93.01

Share Price Decline in 2022 as of Jan. 8: 14%

Roblox Corporation (NYSE:RBLX) was also another stock in which US House Speaker Nancy Pelosi purchased call options in December, according to CongressTrading.com. The company is known as a ‘Metaverse’ stock, meaning it is poised to become one of the frontrunners in the segment if the Metaverse hype takes off in 2022. The California-based firm provides online gaming services, and its platforms include Roblox Client, the Roblox Studio, and the Roblox Cloud.

On December 17, Needham analyst Bernie McTernan initiated coverage of Roblox Corporation (NYSE:RBLX) with a ‘Buy’ rating and a $136 price target, noting that the company was in the early stages of penetrating the global gaming market, and has significant advantages to unlock as a Metaverse company.

Roblox Corporation (NYSE:RBLX) boasts strong fundamentals, with growing revenues and underlying free cash flow generation. Revenue for the third quarter stood at $637.83 million, beating estimates by $1.36 million. EPS for Q3 amounted to -$0.13, exceeding analysts’ forecasts by $0.02.

Investors are loading up on Roblox Corporation (NYSE:RBLX) stock. The number of bullish hedge fund bets on the company stood at 50 in the third quarter, up from 49 in the previous quarter.

Jefferies Group mentioned many stocks in its third-quarter investor letter, and Roblox Corporation (NYSE:RBLX) was one of them. Here’s what the fund said:

“If we look at the Metaverse concept with more lenient guidelines for interoperability, then it becomes easier to see why certain companies are being referred to as Metaverse. On the virtual side, we’d point to companies like Epic Games, TakeTwo and Roblox. In augmented reality, it would be Niantic and SNAP. These are the large capitalized players in the space but albeit, not the only ones. We expect new mulit-billion dollar companies will rise as the Metaverse becomes more mature.

Roblox is a good example. The content is almost entirely user generated, the engine that powers the developer studio is provided by Roblox and developers/creators share in almost all the money that users spend on the platform. In addition, many of the items that you purchase in the avatar marketplace, or even a branded experience like Vans World, can be taken across experiences. Roblox talks a lot about platform extension, which would move the platform beyond just gaming/leisure experiences and into education and workplace offerings. The developer community has the capability to build tools for other developers, there are professional studios being built on the platform and many consumer-facing brands/content are partnering with Roblox to ensure a virtual presence. Roblox actually has a lot of the pieces for our utopian definition of Metaverse, but things like technology, interoperability with outside platforms and a dynamic, two-way economy are what’s missing. However, given our thesis that full interoperability is somewhat unrealistic, it’s easy to see how Roblox fits the definition…” (Click here to see the full text)

Like Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA) and The Walt Disney Company (NYSE:DIS), Roblox Corporation (NYSE:RBLX) is one of the depressed stocks to invest in.

Click to continue reading and see 5 Best Depressed Stocks To Invest In.

Suggested articles:

Disclosure: None. 11 Best Depressed Stocks To Invest In is originally published on Insider Monkey.

Related Posts