9 crashed shares that look promising

Text size

The

S&P 500

closed at a record high on Thursday, rising above 4,000 for the first time. But not every share has participated in the profit so far this year.

Although the majority of the S&P 500 shares are positive for the year, about one in five declined in the first quarter of 2021. Some are lower for fundamental reasons, while others appear to be under the momentum shift of the market from growth stocks to cyclical and value-added.

Once the headwinds subside, the names left behind are likely to catch up as their revenue estimates remain strong. In some cases, analysts have raised their expectations higher this year. It offers a great opportunity to take up shares of fundamentally solid companies at discounted prices.

Of the nearly 100 S&P 500 companies whose shares have been negative so far, about half of 2021’s earnings per share are expected to yield at least 20% higher than fiscal 2019 earnings. About 30 are expected to see the power continue until 2022, meaning their earnings are expected to grow at least another 10% from 2021 levels in 2022.

To find stocks whose earning potential may not be reflected in stock prices, Barron’s took those 30 names and removed all shares that traded more than 30 times 2021’s revenue estimates. That left us with nine names.

Even better, since the end of last year, analysts have raised their revenue estimates for 2021 and 2022 for all the stocks, which means Wall Street is becoming more positive on them. These discounted names are mostly growth stocks in healthcare, technology, telecommunications and consumer sectors.

Note: 2021 and 2022 EPS are consensus estimates.

Source: FactSet

Chip maker

Qualcomm

(ticker: QCOM), for example, its share has dropped almost 10% to date. Investors did not appear to be impressed by the company’s revenue in the first quarter, which was 62% higher than a year ago, but analysts’ expectations still failed. In the longer term, the company, known for chips that power smartphone processors, could benefit from the world’s transition to 5G networks and the Biden administration’s proposed spending.

Vertex Pharmaceutical Products

(VTRX) stocks are another example where a recent pullback due to adverse events may have gone too far. In mid-October, the biotechnology company canceled the development of a once-promising drug after disappointing trial results. Its share has since fallen by 23% and has fallen by 10% to date. Despite the flop of that one middle, Barron’s wrote in March that Vertex is still a powerhouse in the treatment of cystic fibrosis and that it is developing a promising pipeline.

Write to [email protected]