With strong market performance in recent periods, finding stocks priced at a discount can be challenging. However, examining stocks at 52-week lows may identify equities valued below their potential. While exercising caution is prudent, given valid underperformance reasons exist, comparing current metrics to historical peaks could reveal bargain stocks at 52-week lows. Understanding the drivers of underperformance provides insight into rebound likelihood.
Since recovery duration may mirror price declines given long-term depreciation, traders with intermediate to long investment horizons are better positioned to capitalize on stocks at 52-week lows poised for rebounds.
Research also suggests that market prices ultimately reflect business value. The goal is to identify temporarily undervalued stocks due to specific, remediable factors that will regain intrinsic worth over time. Even blue-chip stocks fluctuate substantially regardless of a company’s underlying value. For instance, dividend stocks tend to lag during rate-hike cycles but may experience rebounds once rates stabilize.
Here are three stocks at 52-week lows that appear well-positioned for a powerful rebound.
Starbucks (SBUX)
Starbucks (NASDAQ:SBUX) presents the first of the three stocks at 52-week lows that warrant consideration. The company’s share price has declined since reaching a high in April 2023, moderating after significant growth during the pandemic. Higher inflation has impacted consumer spending, as home-brewed coffee replaced specialty purchases to accommodate tighter budgets. However, inflation is getting under control while real wages begin expanding. As economic stability improves, consumer preferences may trend back toward Starbucks.
Despite the recent share price movement, SBUX maintains healthy financials and attractive valuations compared to its peers. Its forward price-to-earnings (P/E) ratio sits at 23.2x, below the S&P 500 average of 28.3x. With a dividend yield of 2.6%, it provides competitive income relative to the current market.
As a high-quality, well-established company experiencing temporary pressures, Starbucks warrants monitoring for those seeking stocks at 52-week lows presenting long-term growth potential.​
Gilead Sciences (GILD)
Pharmaceutical giant Gilead Sciences (NASDAQ:GILD) is the second pick of the stocks at 52-week lows, potentially poised to rebound. Its shares rose notably in September 2022 following the acquisition of MiroBio and its portfolio of investigational drugs. However, without subsequent updates on clinical trial progress, apparent enthusiasm over the deal has waned, dragging the stock price downward. Though, GILD maintains a significant portfolio in the HIV prevention market.
Nonetheless, the organization provides meaningful value as a dividend-paying entity. With a sustainable 70% payout ratio, Gilead trades at a P/E of 15.5x, well below the pharmaceutical industry average of 82.8x. It also offers a dividend yield of 4.4%, attractive when there exist several stocks at 52-week lows.
For long-term investors focused on recurring income, Gilead warrants examination during its current period of subdued performance.​
Vale (VALE)
Vale (NYSE:VALE), the largest iron ore mining company in Brazil, which is increasingly focused on metals like copper and nickel, is the last of the stocks at 52-week lows to consider. The underlying reason for its decline relates directly to performance in the iron ore market. As construction activity in China endured disruption, demand for iron ore waned. However, analysts now foresee iron ore demand stabilizing, with Fitch upgrading its price forecast for 2024.
The stock is now nearing its customary lows, representing a potential inflection point where it could break the pattern. Until evidence of an iron ore recovery emerges, Vale still presents as a lucrative dividend investment. The stock currently yields a substantial 14.4% dividend with an attractive P/E multiple of just 6.5x, well under the mining sector average of 29x.
For investors with an intermediate time horizon seeking high-income generation combined with prospects for share price appreciation on an industrial rebound, Vale warrants serious consideration among stocks at 52-week lows.​
On the date of publication, Stavros Tousios did not have (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.
