Right now, there are about 15 stocks in the FTSE 350 index that are trading within 5% of their 52-week lows. So, there are plenty of opportunities for those who like to buy beaten-up shares.
Of course, not every stock near its 52-week low is worth buying. With that in mind, here’s a look at two I like, and one I don’t.
Growth at a reasonable price
One stock that I think looks attractive at current levels is pharma giant AstraZeneca (LSE: AZN).
Earlier this month, it produced Q3 numbers that were ahead of analysts’ estimates.
Meanwhile, it also raised its annual sales and earnings forecast thanks to strong demand for its cancer drugs. It now expects its full-year earnings to grow by at least a low double-digit percentage.
One thing that’s worth pointing out here is that the company recently bought an exclusive license for an oral weight-loss drug. This drug could give revenues a boost going forward as weight-loss drugs are in high demand right now.
As for the valuation, the FTSE 100 company currently has a forward-looking price-to-earnings (P/E) ratio of about 15.
I think that’s an appealing valuation. However, it’s above the market average, which is a risk.
A defensive dividend stock
Sticking with healthcare, I also like Reckitt (LSE: RKT) at current levels. It’s a consumer healthcare company that owns a range of trusted brands including Nurofen, Strepsils, and Durex.
I think Reckitt could play a valuable role within a portfolio in the current environment.
For a start, it’s a ‘defensive’ company. In an economic downturn, people are still going to buy painkillers and cough drops.
Secondly, it sports a 3.5% dividend yield. So, there are multiple sources of return here.
A risk to consider is that consumers could be tempted to trade down to cheaper brands.
A second risk is that, with bond yields rising, consumer staples stocks – which are often seen as ‘bond proxies’ – could lose some of their appeal.
Trading on a forward-looking P/E ratio of 15, however, I like the set-up here.
Facing intense competition
Finally, the stock near 52-week lows I’d avoid right now is ITV (LSE: ITV).
Now, ITV shares are cheap. Currently, the forward-looking P/E ratio is about seven – well below the market average.
However, I think this low valuation reflects the immense challenges this company is facing.
Not only is it facing a downturn in advertising (a large chunk of revenues) but it’s also facing a huge amount of competition from other players in the media space. This is a company that is up against Netflix, Amazon Prime, Disney+, Apple TV, Hayu, YouTube, and more.
And viewing habits are changing rapidly. According to Ofcom, only around 50% of young people now watch any live television.
One thing this stock has going for it is a big dividend yield. At present, the yield is about 8.4%.
However, that’s not enough to tempt me here. I just think the long-term outlook is too murky.
