The past several weeks have not been good for the market. The Standard & Poor’s 500 (SNPINDEX: ^GSPC) It is currently below the 8% high in January and looks set to sink further. For some components of the S&P 500, of course, the recent setbacks are even greater.
As seasoned long-term investors can attest, however, these dips ultimately lead to buying opportunities. The key is to find the consistency to do so, even when you know we may or may not have seen the final bottom set. Sometimes sticking with that last bit of a discount can cost more than it saves.
To that end, here’s a closer look at three big but battered S&P 500 stocks ready to rebound sooner rather than later. They may not have seen their final lows yet, but their prices are too low to miss here.
1. Ford Motor Company
It’s not a name that needs much introduction. While Ford Motor Company (NYSE: F) Perhaps no longer the biggest name in the industry, it is arguably the most recognizable brand in the auto industry, with nearly two million vehicles sold last year in the US alone. That’s certainly less than what the company sold in some way in the tumultuous 2020 year, and in that respect, neither Ford nor any of its internal combustion auto industry rivals seem to have reclaimed their peak from the industry’s peak auto sales. In 2016. With Ford’s stock down 38% from its January high, the automaker’s stock currently stands where it was at the time.
The thing is, the buyers who pushed Ford shares from their early 2020 lows to their January peak had the right idea, even if their interest was excessive. Ford Motor Company he is Making waves as a new era of the automobile industry is taking shape.
These are electric cars, of course. While it’s still early days for Ford’s EV seperation, know that the all-new electric Mach-E Mustang has replaced Tesla The Model 3 was Consumer Reports’ top EV pick of 2022, while demand for the Ford F-150 Lightning battery-powered truck was so strong that the company had to stop taking orders altogether. Given Mordor Intelligence’s forecast that the electric vehicle market will grow at an annual pace of more than 23% through 2027, Ford is well positioned for long-term growth. The current share price of less than eight times this year’s projected earnings per share only reinforces the bullish argument.
2. MarketAxess Holdings
While the name Ford may be a household name, MarketAxess Holdings (Nasdaq: MKTX) no. However, there is a good chance that you or someone in your household may be taking advantage of their services without knowing it.
Simply put, MarketAxess provides access to market related information and tools, namely bonds. You don’t see her platform directly. Instead, MarketAxess offers brokerages a powerful interface that gives them access to a wealth of information about the bond market, which they can then pass on to you or an institution that manages the money on your behalf.
It matters even more now because the bond trading market has exploded in recent years, which explains how MarketAxess managed to grow its top streak to 17% in 2020 despite the poor environment we were in at the time. That leaves no room for any real sales growth in 2021, though analysts are calling for 9% sales growth this year and then looking for revenue growth to accelerate growth to more than 12% next year.
Earnings are growing at a similar rate, turning the stock’s 56% decline from its late 2020 peak into a buying opportunity.
Finally, add City Group (NYSE: C) To the list of defeated S&P 500 stocks ready to bounce back. Shares of the mega bank have fallen more than 30% since the middle of last year, hitting 52-week lows earlier this month.
It’s not hard to see why investors are fleeing the holdings of major banks, including Citigroup. The world is struggling to escape the COVID-19 pandemic, and rampant inflation forcing the Federal Reserve to raise interest rates makes borrowing money a less compelling possibility. Consider the fact that the specter of a recession is dampening interest in capital markets, and the foreseeable future doesn’t look very hot for banking.
It can be argued, however, that these sellers have exceeded their target without realizing the upside of higher prices.
Yes, interest in borrowing is drying up. The Mortgage Bankers Association reported that March applications for mortgage loans fell 5% year over year, driving disinterest steadily up for several weeks. At the same time, loan defaults began to rise. Lending market researcher Black Knight notes that for the first time in months, mortgage delays rose for February. The news evokes flashbacks of the 2008 subprime mortgage meltdown.
However, what is not fully explained is the amazing conditions seen in 2021 that make current comparisons a bit misleading. Last year saw a record $1.6 trillion in mortgage loans, according to data from the Mortgage Bankers Association, leaving little need for new loans this year. And while defaults may be about to rise, keep in mind that foreclosures and evictions have been in effect for the greater part of the past two years.
The point is, everything looks and feels relatively bad, but higher interest rates are set to do more harm than good for the bank by making new loans more profitable than loans already granted at lower rates.
The current annual dividend of $2.02 (and a subsequent dividend yield of 4.1%) is not at risk either. The company earned $10.14 per share in the past fiscal year, which leaves it plenty of wiggle room if necessary.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. James Bromley has no position in any of the listed stocks. The Motley Fool owns and recommends MarketAxess Holdings and Tesla. Motley Fool has a disclosure policy.
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