While the market has seen a recovery for the ages since its March lows, there are still stocks that remain oversold. Let’s look at three of my favorites
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I’m telling you all this because today, instead of my usual lamentations of a market that is becoming more and more unfathomable, I’m going to give you a sneak preview of some of the stocks that make up the MyWallSt shortlist. Don’t worry, this won’t be a boring dissection of why Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) or Microsoft (NASDAQ:MSFT) is a good, safe bet. To make it a little more interesting, I’m going to pick three stocks 25% below their 52-week highs who may have been oversold and have ‘bargain’ written all over them.
In case you missed it:
A payments processor and financial solutions company based in South America, StoneCo (NYSE:STNE) stock is down more than 50% from its 52-week high. Donned as ‘the Square (NYSE:SQ) of Brazil’, StoneCo is looking to empower merchants with payment technology and solutions that will modernize businesses’ finances in the area. In an area like Latin America where cash remains king and the population is severely under-banked, the opportunity for growth here is huge. If that isn’t enough for you though, how about an endorsement from one of the greatest investors ever? Yes, Warren Buffett’s Berkshire Hathaway (NYSE:BRK.B) owns about 5% of the company.
Ok, but where’s the catch? Businesses don’t shed more than half their value for no reason.
Correct and right, StoneCo has been hit hard by the global pandemic, and just this week has been forced to lay off 20% of its workforce, about 1,300 employees. The company has seen a sharp decline in card transaction volume and, without the Fed stimulus which has done so much to protect the small and medium businesses in America, StoneCo’s customer base will be a lot harder hit than if it were based in the U.S..
However, higher volatility is the price you pay for the growth opportunities afforded by Latin American businesses, and for those with a high-risk tolerance, StoneCo could be one stock with plenty of room to run as the global economy recovers.
For a more in-depth look at the business, check out my colleague James’ piece on if StoneCo is a good investment.
Huazhu Hotels Group
Just about qualifying for this exclusive list at 25.6% off its 52-week highs is Huazhu Hotels Group (NASDAQ:HTHT), a purveyor of hotels across China. Capitalizing on China’s growing middle-class and the burgeoning tourism and business travel industries in the country, Huazhu operates over half a million rooms in 369 cities. In a region that has incredibly high barriers to entry, the homegrown hotel conglomerate, which owns more than 10 different brands, is well insulated from foreign competitors.
Did I mention that this list was not for the faint of heart?
If you were to tell me in March that I’d be talking about a Chinese hotel group as a potential investment, I’d ask you where you left your straightjacket. That was a lifetime ago on Wall Street though, and as investors shift their perspective to recovery mode and the ‘new normal’, Huazhu seems like an interesting contrarian play at a nice price. However, with the Luckin Coffee (NASDAQ:LK) scandal bringing the spotlight on U.S.-listed Chinese stocks and their accounting practices, investors are reminded of the added risks involved in investing in our eastern counterparts. This one is, again, for those investors maintaining a high risk tolerance.
Last on our list is a social media company that has been through the wringer in the past week after a less than stellar earnings report. Pinterest (NYSE:PINS) is down more than 50% from its 52-week highs, it’s also up more than 50% from its 52-week lows, and is also down 20% in the past week alone. Apologies if that sentence gave you a headache, you’re not alone.
Prone to slightly higher levels of volatility than your average company, Pinterest disappointed investors at last week’s earnings call with the warning that its gross margins would contract as its operating expenses were expected to rise this year. For a business that has been public for just over a year and has been posting impressive growth figures since its IPO, the ensuing sell-off seems to me like a bit of an over-reaction.
Having cut out a niche in the highly competitive social media industry, as well as putting the advertising duopoly of Facebook (NASDAQ:FB) and Google (NASDAQ:GOOG) on notice, I think Pinterest has plenty of road to run. I see it as a much more enticing investment opportunity than Twitter (NYSE:TWTR) or Snap (NYSE:SNAP) in the space at its current price point.
For a more detailed rundown, check out Should I Buy Pinterest Stock?
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.