The start of a New Year is a good time to scrutinize a portfolio and make some adjustments including adding undervalued stocks. Stocks that enjoyed big runs last year may cool off, requiring investors to search out securities they can buy low in hopes of eventually selling at a higher price. Fortunately, there are still a lot of undervalued stocks available despite the market rally that occurred in 2023. Stock market returns over the past year were uneven, with about 70% of the stocks in the S&P 500 lagging the index. Growth stocks outpaced value equities and most of the big gains were concentrated in mega-cap technology stocks. This presents investors with an opportunity to buy quality names on the cheap before they too move higher. Here are seven of the most undervalued stocks to buy for 2023.
The company’s shares are now trading at 26 times future earnings estimates, which is low by historic standards and presents a window of opportunity for investors to take a position while the price is favorable. In November, Starbucks reported better-than-expected third-quarter financial results, and subsequently announced details of a new strategic plan that will see the retail coffee chain open 17,000 new locations by 2030 even as it cuts $3 billion in costs. While ambitious, the growth strategy has done little to help lift SBUX stock. The share price is being weighed down by ongoing concerns about sales in China, where the economy is struggling, and unionization activity at home in the U.S.
The company also said that it will buy back $10 billion of its own stock over the next year and reinstated its 2023 earnings guidance. However, even with the latest move higher, GM stock still looks undervalued. The company’s shares are currently trading at just five times future earnings estimates, which is why its among the more attractive undervalued stocks. Also, the stock is up only 7% in the last 12 months and is currently trading at the same level it was at a decade ago. A note of caution that it will likely be awhile before GM recovers from last fall’s strike by the United Auto Workers union, a job action the company says cost it $800 million in lost vehicle production.
Long-term investors who are blessed with patience may want to do some bottom fishing after Nike’s latest financial results. In truth, Nike’s recent print was better-than-expected. It was the forward guidance that spooked investors. The company reported quarterly earnings per share of $1.03 versus 85 cents that had been expected among analysts. Q2 revenue was $13.39B, slightly below the forecasted $13.43B. Nike’s gross margins increased for the first time in 18 months, and inventories dropped 14% to $8 billion. Unfortunately, Nike said that it now expects full-year revenue to grow 1%, compared to a prior outlook of up mid-single digits. For the just completed fourth quarter of 2023, Nike expects revenue to be slightly negative. That news sunk NKE stock. But there is a buy-the-dip opportunity here.
However, the stock is only trading at 14 times future earnings estimates, which is low for a company of its size, and it offers a dividend payment that yields 2%. FedEx reported earnings per share of $3.99 compared to $4.18 that was expected. Despite the miss, the company’s earnings were up more than 25% from a year earlier due largely to cost-cutting initiatives. Revenue in the latest quarter declined 3% to $22.17 billion from a year earlier, also missing analysts’ estimates. Looking ahead, FedEx said that it expects a low-single-digit decline in revenue for the entire fiscal year, down from a previous forecast of flat sales. It was the second consecutive quarter that FedEx lowered its sales outlook, citing weakening demand. However, the company said that its operating income should improve in the months ahead due to its ongoing cost-cutting plan.
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