The 52-week low list is worth checking every so often in case there’s a name that comes up that you’ve been meaning to buy but have forgotten to keep tabs on. Undoubtedly, a wide range of factors can cause a stock to plummet to 52-week lows — perhaps a company-specific issue that’s caused the fundamentals to decay a bit or a few quarterly earnings results failed to meet expectations. And, of course, there are always those stocks that are just out of favour with investors, perhaps due to hefty valuations, growing distaste for a specific industry, or the broad markets as a whole.
And while not every stock that’s on the fresh 52-week low list is a value stock that’s overdue for a big bounce, I think that value-minded investors may wish to give the cohort a scan in case there’s a great piece of merchandise that’s been unfairly tossed into the bargain bin.
In this piece, we’ll look at two marked-down stocks that, I think, are starting to get ridiculously cheap. Though catching a bottom in an underperforming name is seldom a good idea, especially for new investors who don’t intend to stay aboard over a long-term horizon, the following two, I believe, are quality firms that are oversold and out of favour for reasons that I view as quite overblown.
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BCE
No surprises here. Shares of telecom titan BCE (TSX: BCE) are close to not only 52-week lows but depths not seen in more than a decade. In fact, the stock is pretty much where it was way back in 2010, the rise out of the Great Financial Crisis stock market crash. Indeed, the bear has had its way with BCE of late.
But how much worse can things get for the telecom firm now that it’s shed close to 60% of its value? It’s hard to tell, with minimal catalysts to look forward to and telecom industry headwinds that stand to worsen if Canada’s economy slips into a recession, either due to tariffs or something else.
Though the calls of some pundits to throw in the towel have gotten louder on the way down, I think deep-value investors who are in it for more than the dividend may wish to start buying rather than selling.
The dividend was cut, and there’s no going back on that. But the new yield of 5.64% isn’t all too bad, even if it pales in comparison to the yields of some of its peers in Canada and south of the border. With BCE getting into the artificial intelligence data centre business, perhaps there’s room for optimism, even though such pricey projects may not have a needle-moving effect anytime soon.
Boyd Group Services
Another intriguing name that’s close to 52-week lows is auto-body repair firm Boyd Group Services (TSX: BYD), which recently slipped below the $200 mark for the third time in six months. Indeed, Boyd could find itself between a rock and a hard place for a while longer as same-store sales (SSS) trend downward while margins become a bit more pressure in the face of a potential economic slowdown.
Add uncertainties relating to autonomous vehicles (fewer accidents?) into the equation, and BYD stock becomes a tough name to catch on the way down. Either way, I’m a fan of the valuation (1.07 price to sales) and the management team that’s steered the firm higher from rocky industry climates before. My takeaway? It might be time to start doing some buying in the fallen $4.4 billion mid-cap.
