Market overreaction can be a beautiful thing if you’re a long-term investor. I mean, overreaction to short-term events often opens up value gaps in stocks, lending you the opportunity to take advantage of arbitrage opportunities.
Although major U.S. stock indices have recovered since the turn of the year, a few assets have gone off the rails, losing significant value. Some of the sell-offs are justified; however, I noticed investors have turned their backs on numerous best-in-class securities. As such, I dialed in on the oversold space to pick out three stocks wrongly trading at 52-week lows.
Herewith are three stocks to buy at 52-week lows, primed for recovery in late 2023 and early 2024.
Sibanye-Stillwater (NYSE:SBSW) lost a good chunk of its market value in the past year. Although plagued by diminishing platinum group metals (PGMs) prices and structural stoppages, SBSW’s slump seems somewhat overplayed.
For those unaware, Sibanye is one of the largest PGM miners in the world, with business interests in South Africa and the United States. Additionally, the company has a presence in gold mining via its own mines and a 50% ownership in DRDGold (NYSE:DRD).
Sibanye sustained severe setbacks in the past year, derived from mine flooding in the United States. Moreover, the company endured a series of labor union strikes in South Africa. However, I think the tides are about to turn. Sibanye’s U.S. mines are back up and running while South Africa’s labor union strikes have ended. In fact, the labor market has softened significantly of late, meaning wage pressures are abating.
The mining company released its first-half results in August, revealing $3.3 billion in revenue. Even though Sibanye’s top line languished by 14% year-on-year, the PGM price climate has improved, as shown by a 1.6% reversal in platinum prices during the past month, seemingly driven by interest rate pivot talks. On top of that, Sibanye’s gold segment returned to positive EBITDA in its third quarter, recovering from a $819 million loss a year ago.
Sibanye’s P/E ratio of 5.06x is accompanied by its stock trading below its 50-, 100- and 200-day moving averages, illustrating quantitative value. Therefore, I believe the aforementioned fundamental factors will combine with SBSW stock’s quantitative metric and lead to significant gains.
Bank of America (BAC)
A receding funding rate play is the name of the game here. The U.S. yield curve has finally started settling lower in the past month as its level has dropped across the board.
The curve’s reduction is alluring to Bank of America (NYSE:BAC) for two reasons. Firstly, the 12-month yield has dropped by approximately 10 basis points in the past month, resulting in lower funding rate opportunities. In addition, lower yields translate into lower discount rates on bonds, suggesting much of BAC’s asset base can be marked up. Sure, such benefits will only accrue if the curve’s depletion resumes; however, I am prepared to bet it will, given the growth in long-term inflation has broken.
Despite the systematic support for the banking industry, many might be asking why I picked out Bank of America here. In short, the stock has sustained outlying losses, performing the poorest of the big four banks in the past 12 months. Therefore, I see a technical trading opportunity in store.
I want to highlight a few fundamental aspects to add to the argument.
Bank of America strolled past its earnings estimates in its third quarter, revealing an earnings-per-share beat of eight cents. Net interest income was cataclysmic, climbing by $300 million the prior quarter. Furthermore, the bank’s non-interest segment cut operating costs by $200 million, echoing relief from operating input costs.
In closing, Bank of America’s P/B ratio of 0.84x speaks volumes. Moreover, fundamental and technical support could carry its stock into stardom.
PayPal Holdings (PYPL)
If there ever was a case for mean-reversion, PayPal Holdings (NASDAQ:PYPL) is it. I think this is a once-in-a-lifetime opportunity with gold dust sprinkled all over it.
PYL stock sustained significant not losses earlier this year, bringing its stock down by about 40% since November last year. Some may argue it was a correction, and others might argue that PYPL stock’s slump is due to sector consolidation. I simply argue it was a mistake by most.
Let’s run through an overview of PayPal stock’s core value drivers.
PayPal released its earnings at the turn of the month, revealing a revenue beat of $20 million and an earnings-per-share triumph worth seven cents. Salient to PayPal’s quarterly earnings beat was a 15% rise in total payments volume, stemming from continued growth in international payments amid momentum. PayPal’s active accounts tapered by three million during the quarter, which forms part of a longer trend concern. However, I would urge investors to consider transaction volume and value, as I believe account openings can be deceiving, especially in the short term.
Furthermore, a summation of PayPal’s key metrics showcases its resilience. For instance, the firm has a broad-based market share of 40.52%, a return on equity ratio of 18.82%, and a net income per employee standing at nearly $126,000. Collectively, the aforementioned data points suggest we are looking at a company with economies of scale and the ability to outprice its competitors while simultaneously embarking on a growth-by-acquisition spree.
Lastly, PYPL stock is below its 200-day moving average, providing investors with a solid entry point!
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.