When I think of blue-chip stocks, companies in the S&P 500 or Dow Jones Industrial Average come to mind. If you want to find blue-chip stocks to buy trading at all-time lows in the final quarter of 2023, you might be out of luck.
According to Finviz.com, 62 S&P 500 stocks are at or near a 52-week low as of Oct. 25. Of the 30 in the Dow, just two are hitting 52-week lows at the moment. If I stretch the search for all U.S.-listed stocks over their lifetime, I might be able to find three that trade near their all-time lows, but I doubt you’d consider them blue chips.
However, I probably can find three S&P 500 or Dow stocks hitting 52-week lows that are also down considerably over the past 5 to 10 years.
To make things even more difficult for myself, I’ll ensure my three picks are from different index sectors and are down at least 20% in 2023.
Paramount Global (PARA)
Paramount Global’s (NASDAQ:PARA) stock is down nearly 36% year-to-date through Oct. 25 and almost 80% over the past five years. It hasn’t traded this low since August 2009. Of the three names, the owner of CBS and Paramount Studios came the closest to its all-time low of $3.06 in March 2009.
The company’s shares have fallen for several reasons in recent years.
A big issue hanging over the head of the stock is that controlling shareholder Shari Redstone, in recent years, has been looking to merge her company with another media company to gain scale or sell outright. The problem is the time to make a move has probably passed.
“‘The market is crying out for reshaping media company portfolios and consolidation,’ said Jon Miller, chief executive at Integrated Media and a senior advisor at venture firm Advancit Capital, which Redstone co-founded. ‘But the deck is stacked against large-scale transactions now because of both immediate concerns in terms of ad sales, subscription video numbers and the cost of debt,’” CNBC reported.
While Paramount has tremendous assets, including the Paramount studio lot in Los Angeles, it’s losing money on its Paramount+ streaming service. Walt Disney (NYSE:DIS) shareholders know all about that.
When CBS and Viacom merged in 2019, the combined business was valued at $30 billion, about 4x its market capitalization in 2023. That’s significant value destruction.
However, if you’re an aggressive investor, it still generates positive operating income before interest, taxes, depreciation and amortization (OIBDA) of more than $2 billion annually.
It’s not going out of business anytime soon.
Invesco (IVZ)
I’m a fan of some of Invesco’s (NYSE:IVZ) equal-weighted ETFs, such as the Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP). In my opinion, the equal-weight version of the index does a better job of diversification. But I digress.
Active asset managers have been bleeding cash as the bull market has slowly ended. As Bloomberg recently reported, it could worsen when the next bear market rears its ugly head by revealing vulnerabilities and weaknesses covered by rising share prices.
“About 90% of additional revenue taken in by money managers since 2006 is simply from rising markets, and not from any ability to attract new client money, according to Boston Consulting Group,” Bloomberg’s Oct. 22 article stated.
Invesco was one of the names mentioned in the article. Bloomberg points out the company’s revenues have remained flat over the past three years. The same can be said for its operating income.
The good news is that despite all the doom and gloom, it generated $1.0 billion in operating income from $5.8 billion in revenue in the trailing 12 months ended June 30. That’s a reasonably healthy operating margin of 17.2%.
With IVZ stock down 31% in 2023 and trading at its lowest point (except for the March 2020 correction) since the financial crisis in 2009, its price-to-sales ratio of 1.1 is at its lowest level over the past decade.
As Buffett would say, “Be greedy only when others are fearful.”
Southwest Airlines (LUV)
Southwest Airlines (NYSE:LUV) stock is down 27% in 2023 and 52% over the past five years. Relative to the index, it’s down nearly 200%. Ouch. Excluding the short-lived March 2020 market correction, it hasn’t traded at these levels since April 2014.
Some suggest that there are few catalysts to move LUV stock higher in the next 6 to 12 months. By the time this is published, the airline may have reported its Q3 2023 results. Revenue per available seat mile (RASM) is expected to be down 6% at the midpoint of its guidance, and fuel costs of $2.75 a gallon, up from its previous guidance of $2.60.
However, it said in early September that it should deliver solid profits in Q3 2023 and for the entire year.
Southwest had long-term debt of $8.0 billion as of the second quarter, or a reasonable 57% of its market cap. If you back out the $12.2 billion in cash and short-term investments, its net cash position was $4.2 billion.
It’s understandable why only six of 22 analysts rate it Overweight or an outright Buy. With the summer travel season in the rearview mirror, only a strong holiday season can pull it out of the nosedive it’s been in this year
The excellent news is that analysts have a $30.50 median target price, 29% higher than where it’s currently trading, making it a good contrarian value play heading into 2024.
On the date of publication, Will Ashworth did not hold (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.
