If you’re looking for good deals in the stock market, you may want to consider currently underperforming investments that offer plenty of upside in the longer term. One way to spot these types of stocks is to limit your search to those near their 52-week lows. Generally, there is bad news or troubling prospects at these companies, causing them to make risky purchases. But if they prove their doubters wrong, they can give you better-than-expected returns.
Intel (NASDAQ: INTC), Cisco systems (NASDAQ: CSCO)And PepsiCo (NASDAQ: PEP) have all fallen so far, but they could still prove to be good investments to hold for years to come.
1. Intel
Intel is proof that simply being a chipmaker isn’t a recipe for a rising stock price this year, despite all the hype surrounding artificial intelligence (AI). With shares down 40% since January, it’s clear that investors aren’t excited about the company’s prospects.
Sales growth in the first quarter was a fairly modest 9%. More worrying, however, was the net loss of $437 million, although that was at least a big improvement over the same period last year, when Intel posted a net loss of $2.8 billion.
I’m optimistic that Intel can turn things around, given the need for the US to build up its domestic chip manufacturing capacity. Currently, US technology companies rely heavily on overseas foundries, and the government is providing major incentives and support to make it easier for domestic companies to succeed in this field and become major chip suppliers in the future.
It will take some patience, but as Intel management focuses on cutting costs and taking advantage of the opportunities available production computer chips, this can be a great contrarian investment to stick with, provided you’re okay with accepting some risk. Currently, the tech company’s shares are trading within a dollar of a 52-week low of $29.73.
2. Cisco systems
Networking and IT infrastructure giant Cisco could be a good long-term buy. As companies upgrade their infrastructure to meet the growing needs of their AI-powered computing, demand for Cisco’s products and services is likely to increase. It offers solutions that address emerging AI trends, including AI-powered security and software options to help companies get the most out of their next-gen technologies.
The problem is that it may take some time for much of that demand to materialize, as companies are likely to be selective about what they spend their money on in today’s high interest rate environment. Keeping costs low will remain a priority for companies until lending conditions improve. For now, Cisco may have a tough road ahead. The company’s product revenues fell 19% to just over $9 billion in its fiscal third quarter ended April 27.
At a time when investors are focusing on stocks already benefiting from the growth of AI, Cisco simply doesn’t stand out. That could change, though, and buying the stock before that happens could lead to great returns for investors in the long run. Cisco hit a new 52-week low this week, and the price may get worse before it gets better.
3. PepsiCo
By raising prices, PepsiCo has been able to generate strong returns despite inflation. However, as inflation cools and the company’s coming quarters are compared to impressive comparables from prior periods, it seems likely that PepsiCo’s growth rate will slow.
In the fiscal quarter ended March 23, the company’s revenues rose just 2% to $18.3 billion. That’s not the kind of growth that excites investors, especially for a stock that trades at 25 times its earnings. A year ago, turnover grew by more than 10%.
But prices are stable and although they rose rapidly, they may not fall much from their current levels. And with higher prices and better margins, PepsiCo could be poised for further long-term growth as consumers come to accept the newly increased prices for the company’s products. And as demand increases as economic conditions improve, PepsiCo should return to growing at a faster pace.
Some weakness will likely remain in the short term, but this stock could provide great value to investors in the long term. PepsiCo is trading just 6% above its 52-week low of $155.83 per share. And with a dividend yielding 3.3% at the current share price, investors may want to buy it not just for the lower price, but also to lock in that generous yield.
Should You Invest $1,000 in Intel Right Now?
Before you buy shares in Intel, consider this:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Intel wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $802,591!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Cisco Systems. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
The Nasdaq is rising, but these three stocks are nearing their 52-week lows, originally published by The Motley Fool
