Wall Street can — and will — turn against stocks the Club holds in high regard. In some cases, our move is to run toward the wreckage, not away from it. “I want to be greedy on the downside. I want to be giving on the upside,” Jim Cramer said on Tuesday’s edition of the “Homestretch.” “When I see a stock getting tossed out that I love, that is fantastic.” Building on Jim’s philosophy, we analyzed the Club’s portfolio to identify beaten-down stocks that trade at reasonable valuations. The specific circumstances around each stock vary, and impact our ultimate view on whether now is the time to buy. But in general, stocks that meet the following criteria may be the kinds of opportunities to consider taking further action on: The stock trades at least 15% below its 52-week high, as of Tuesday’s closing price. We used the 15% cutoff because the market is in overbought territory, based on Jim’s trusted S & P 500 Short Range Oscillator . In those situations, we have a higher threshold for determining a stock is worth buying on weakness. The stock has a forward price-to-earnings multiple under 18, which puts its valuation below the S & P 500’s forward P/E, as of Tuesday’s close. We found 10 Club holdings that met both measures, including Caterpillar (CAT) and Halliburton (HAL). Here’s a breakdown of the full list — plus our thinking on which stocks look like buys Wednesday. BHC 1Y mountain Bausch Health’s 12-month stock chart. 52-week high date: April 5, 2022 Percent below 52-week high: 68.4% Forward P/E: 2.1 We continue to view troubled Bausch Health as a wait-and-see situation. Specifically, we’re awaiting fresh information on the pharmaceutical company’s legal fight over its patent for the drug Xifaxan. CTRA 1Y mountain Coterra’s stock performance over the past 12 months. 52-week high date: June 8, 2022 Percent below 52-week high: 31.35% Forward P/E: 9.2 We want to see another pullback in the energy sector before thinking about committing more cash to Coterra Energy (CTRA) and other holdings in the group, which had a nice little rally off mid-March lows. In fact, we used that recent strength to exit our Devon Energy (DVN) position Tuesday. We are content with staying patient in Coterra. Management’s decision earlier this year to make stock buybacks a higher priority means we should steadily own more of the company without needing to buy additional shares. PXD 1Y mountain Pioneer Natural Resources’ 12-month stock performance. 52-week high date: May 31, 2022 Percent below 52-week high: 26.94% Forward P/E: 9.5 Our view on Pioneer Natural Resources (PXD) is similar to Coterra. We made two purchases at lower levels in March, most recently on March 20 at around $185 per share. But now after back-to-back strong weeks for the stock, we see no reason to add to our position up here around $209 per share Wednesday. WFC 1Y mountain Wells Fargo’s stock performance over the past 12 months. 52-week high date: April 11, 2022 Percent below 52-week high: 26.66% Forward P/E: 7.6 For investors who believe the U.S. economy is not headed toward a steep recession, Wells Fargo (WFC) is a buy under $37 per share. Of course, bank stocks have fallen out of favor on Wall Street following the collapse of three U.S. lenders in March, and could remain a near-term headwind on WFC shares ahead of the firm’s April 14 earnings report. But the bank’s fundamental turnaround story is intact and will create value over time. That’s what makes the stock attractive here at less than 8 times earnings. HAL 1Y mountain Halliburton’s stock price over the past 12 months. 52-week high date: June 8, 2022 Percent below 52-week high: 24.46% Forward P/E: 10.4 Like our two other energy stocks, we want to see another pullback in Halliburton shares before we’d add to our position. The stock is still trading above our most recent purchase price, at roughly $30 per share, on March 17 when Wall Street was dumping the oils. Big picture, the oilfield services’ company is still poised to benefit from a multiyear upcycle in investment activity. F 1Y mountain Ford Motor’s 12-month stock performance. 52-week high date: August 16, 2022 Percent below 52-week high: 23.74% Forward P/E: 7.8 Many market participants are very negative on Ford Motor (F), due in part to fears the U.S. economy is entering a cyclical downturn that will crimp auto sales. However, the bears are too pessimistic. We see Ford as a buy here. On Tuesday, Ford said first-quarter vehicle sales rose roughly 10% compared with the year-ago period. Ford’s full first-quarter earnings report, set for May 2, should demonstrate the company’s earnings leverage as costs in its internal combustion division come down. QCOM 1Y mountain Qualcomm’s stock performance over the past 12 months. 52-week high date: July 22, 2022 Percent below 52-week high: 21.93% Forward P/E: 11.7 Our sour attitude on Qualcomm (QCOM) remains, and we don’t want to allocate any funds to the chipmaker here. As Jim mentioned during the Club’s March edition of the “Monthly Meeting,” , we may look to exit our position in Qualcomm if the stock gets back to the $130 levels. CAT 1Y mountain Caterpillar’s stock performance over the past 12 months. 52-week high date: Jan. 27, 2023 Percent below 52-week high: 18.26% Forward P/E: 13.4 Caterpillar is a beaten-down stock worth buying. We acted on that view Tuesday, buying 20 shares at roughly $217 apiece. The stock remains on sale Wednesday, down about 2% to $213 per share. Caterpillar’s slide comes as mounting recession fears prompt Wall Street to buy defensive sectors like health care and sell traditionally cyclical sectors. However, our belief that Washington’s infrastructure spending is a multiyear boon to Caterpillar allows us to view this weakness as a buying opportunity. MS 1Y mountain Morgan Stanley’s stock performance over the past 12 months. 52-week high date: Feb. 14, 2023 Percent below 52-week high: 16.01% Forward P/E: 11.6 Shares of Morgan Stanley (MS) have fallen on hard times amid the fallout from the U.S. banking crisis. But we’re sticking with the firm because of its pivot toward asset management. We value the stability that asset management’s fee-based revenues bring compared with Morgan Stanley’s traditional investment banking operations. The stock looks cheap now at less than 12 times earnings, and over time its transformation should support a premium valuation. JNJ 1Y mountain Johnson & Johnson’s stock performance over the past 12 months. 52-week high date: April 25, 2022 Percent below 52-week high: 15.11% Forward P/E: 14.9 Johnson & Johnson (JNJ) is a buy after the pharmaceutical giant agreed to pay $8.9 billion to settle allegations that the company’s talc products caused cancer. While the settlement with plaintiffs needs approval from a U.S. bankruptcy court judge, it is a great development for J & J shareholders . A series of unfavorable legal rulings this year have been a major overhang on the company’s stock price. Now there appears to be a resolution on the horizon, giving much-needed clarity to investors. Jim said Wednesday J & J has become his favorite Club stock. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
An employee assembles an excavator at the Caterpillar Inc. manufacturing facility in Victoria, Texas.
Callaghan O’Hare | Bloomberg | Getty Images
Wall Street can — and will — turn against stocks the Club holds in high regard. In some cases, our move is to run toward the wreckage, not away from it.
Source link: https://www.cnbc.com/2023/04/05/10-fairly-priced-club-stocks-are-well-off-highs-heres-where-we-stand-.html