These great stocks are down; Get them while they’re cheap!


Market watchers will no doubt have noticed that as of this writing, the market has bounced a good bit from the lows of the year, and yet, the S&P 500 is still closer its low than its high, the 2,872 hit back on the 26th of January. True, we are only talking about a few percentage points here, but in the ever-changing market, that means a number of worthy stocks will have taken quite a spill. It is these that we are searching for today, great stocks at discounts of 10% or greater to their recent highs. I’m going to be digging a little deeper into my watched-list than usual today, since I suspect you’ve all heard enough by now of my (bullish) opinion of mainstays such as (AMZN), Alibaba (BABA), and NVIDIA (NVDA).

Remember to treat these ideas as just that, ideas, and do your own research before making any investment decision.

Priceline (PCLN)

I like to start with an easy one, and there’s nothing easier than a good old fashioned growth story. Analysts see Priceline’s revenue rising 17% in 2017 (with one quarter left to report) and 14% in 2018. The company earned $42.65 in 2016, and the consensus estimate is for $74.99 in 2017 and $83.98 in 2018. Those numbers are being helped along a bit by some share repurchases but given that it comes out to nearly 100% earnings growth over two years, I’m not inclined to quibble. You don’t get that kind of growth cheap… or do you? PCLN’s trailing P/E Ratio is 25.2 and its forward P/E is 21.6. Despite the growth, those are better numbers than the market’s average.

PayPal (PYPL)

On Friday, February 2, PayPal’s Chief Financial Officer reassured the public that there was no reason to worry about its split from eBay, as it was a natural part of the company’s evolution. We can only speculate as to whether the announcement would have unnerved the Street had he delivered it before, rather than after eBay announced that it would no longer be using PayPal as its go to payment service. Instead, the Street felt blindsided by the news, delivered a day earlier, and PYPL shares fell by 8.3% as a result. The concern is understandable, not only because eBay and PayPal have been so closely associated over the years, but due to the large amount of revenue (about 20%) PayPal has effectively lost overnight as a result of eBay’s decision. Even so, you can take away of a year of growth from PayPal, but as long as it starts growing again at the same rate (also about 20% annually) this remains a strong stock with plenty of room to grow.

Wynn Resorts (WYNN)

I don’t necessarily hold with the strategy of buying “depressed” stocks when, as with WYNN, they are depressed for a reason that goes beyond mere cyclical market moves. Also, one generally considers it a negative when a company loses its founder, especially when that founder has profoundly shaped and changed the industry. Even so, it’s hard to view the departure of Steve Wynn with anything more than a shrug and an acknowledgement that the parting could have gone a lot worse. The real reason why Wynn Resorts is in a rebuilding year is that, along with the rest of the industry, the company expanded too rapidly in Macau China, and when a pullback came, it faced huge costs. Now, Macau seems to be on the rise again, and the company no longer lives under the specter of an out-of-control CEO.

STORE Capital (STOR)

This a REIT, and as such, it’s been a little beaten down by rumblings of rising interest rates, though shares actually peaked above $31, way back in July of 2016. The REIT invests only in single-occupancy commercial buildings, which gives it a competitive advantage over REITS that own malls, office parks, and other structures that tend to have high vacancy rates. As of today, you can not only get STOR at a huge discount (shares have a recent price of $23.38), but you can enjoy a high yield of 5.23%.

Colgate-Palmolive (CL)

Colgate-Palmolive is one of the greatest dividend champions of all time. It’s one of my own long-term holds and I can’t imagine ever selling it. It seems odd to mention it in a piece about stocks that have fallen 10% or more, because it doesn’t usually do that. And yet, since January 25, CL shares have fallen from $77.32 to $70.30. So, did somebody come up with a procedure for making teeth permanently strong, white, and clean? No chance. The trouble, which is affecting the entire personal and household product industries, is a rise in price of underlying materials which made profit margins a little slimmer in the fourth quarter than the market would have liked. Of course, like market declines themselves, these things tend to be cyclical, making it a great looking time to add this perennial winner to your portfolio.



Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

You May Also Like