Who doesn’t love a superb bargain?
Currently, we see 30 S&P 500 companies within 3% of their 52-week lows, according to Finviz.com. At the same time, 40 S&P 500 stocks are within 3% of their 52-week highs. This lack of leadership between the highs and lows indicates investors are still determining the direction of the markets in 2024.
In July, CNN Business reported that the New York Federal Reserve’s recession probability model has hit its highest point since 1982. The model suggests that May 2024 will be when we could possibly fall into a recession.
However, veteran market analyst Ed Yardeni believes the index will hit a record high, rising as much as 20% by the end of 2024.
If that’s the case, aggressive investors might want to consider these three S&P 500 stocks at 52-week lows. They appear primed to bounce back after a poor showing so far in 2023.
Realty Income (O)
Realty Income (NYSE:O) trades at $56.56, within $1.06 of its 52-week low and 20% below its 52-week high. That suggests the real estate investor is trading in a very tight range in 2023.
Year to date (YTD), O is down nearly 12%. Compared to the JPMorgan Realty Income ETF (NYSEARCA:JPRE), Realty Income is the fifth-largest holding at 6.35%, which is down more than 20% over the past five years.
On Aug. 25, the company announced it would invest $950 million in the Bellagio Las Vegas Resort, owned by the Blackstone Real Estate Income Trust (BREIT). This joint venture sees Realty Income acquire 22% of the property, contributing $300 million in equity to the partnership. That is on top of $650 million toward an interest-bearing preferred equity interest in the joint venture.
“This transaction to acquire an interest in the Bellagio, an iconic property, represents our second investment in the gaming industry and exemplifies the advantages of our size, scale and access to capital,” Realty Income CEO Sumit Roy said.
The company’s $3.07 annual dividend rate yields a high 5.4%. Get paid to wait for real estate stocks to come back in vogue. It has made 638 consecutive monthly dividend payments over 53 years.
Target (TGT)
Target (NYSE:TGT) is no longer the darling of retail stocks. Its shares are down nearly 20% in 2023, trading within $1.25 of its 52-week low of $120.75. As recently as February, it traded over $180.
Companies blame retail theft for their poor results.
“Retailers say that shrink amounted to $94.5 billion in 2021, according to the National Retail Federation’s (NRF) annual survey of companies, up from $90.8 billion in 2020,” stated Yahoo Finance senior reporter Hamza Shaban. “As a percentage of sales, however, that figure came out to about 1.4% of sales, down from 1.6% in 2020.”
Higher prices due to inflation pushed the shrink dollar volume up in 2021. But the critical number is the percentage of sales, which was lower.
In May, Target said shrink would be $500 million higher in 2023. By June, its share price fell by 25%. And in August, it reported Q2 2023 results which included a 273% year-over-year (YOY) operating profit increase to $1.2 billion.
Target will get through this bump in the road, making it one to buy now.
Discover Financial Services (DFS)
On Aug. 14, 2023, Discover Financial Services (NYSE:DFS) announced that CEO Roger Hochschild will step down in his executive and board member roles. The surprise news sent DFS shares below $90 for the first time since December 2020.
This may be due to the company overcharging certain customers on swipe fees since 2007. It took an additional $365 million in accrued expenses in Q2 to refund merchants as they work through regulatory issues. This relates to less than two basis points as a percentage of revenue over 16 years.
In turn, this gave the company a perfect excuse to cut ties with Hochschild, employed for 25 years. This includes nearly five years as CEO and 14 years as Chief Operating Officer prior.
On Hochschild’s watch, DFS stock has seriously underperformed.
Another near-term concern other than replacing its CEO is that its delinquencies in July were 3%, above pre-pandemic levels in July 2019 of 2.4%.
However, the business remains quite profitable. While its net income was down 18% from Q2 2023, it was still $901 million, or 23.2% of its $3.87 billion net revenue. Analysts have a median target price of $110.50, 23% higher than its current share price.
Whether share price continues to fall remains the big unknown. So if risk is your middle name, DFS could be your buy.
On the date of publication, Will Ashworth did not have (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.
