Too often, investors sell into the panic and dump a beaten down stock because, well, everyone else is doing it. However, stock prices fluctuate for many reasons. And just because a stock is trading near its 52-week low doesn't mean it is a terrible company or a low caliber stock. In fact, buying certain stocks near their 52-week lows can often create an opportunity for patient investors. Below, Motley Fool contributors explain why Sears Hometown and Outlet Stores , Advanced Micro Devices , and lululemon athletica are three stocks near 52-week lows that are worth buying today.
Continue Reading Below
Rich Duprey (Sears Hometown and Outlet Stores): Can Sears Hometown & Outlet Stores succeed where its former parent Sears Holdings cannot? If you look at Sears Hometown's stock these days, you'd think the answer is a resounding "No!" Shares of Sears Hometown are down 58% over the past year, touching a new low of $12 on Friday. Since its IPO back in 2012 when it opened on the market at $31 a share, and following a brief euphoric period when the stock hit $56, it's been all downhill. From peak to trough, SHO has lost 78% of its value. Ouch. So why buy the stock now?
There are two businesses operating under one roof, Sears Hometown -- which covers products and services normally found at Sears -- and Sears Outlet, essentially a dent-and-ding store for its parent, primarily selling distressed, refurbished, and liquidated merchandise.
Though significantly smaller with only 12% of the total 1,257 stores SHO operates, Sears Outlet is performing well. Revenues jumped 20% last quarter, driven higher by a big 9.6% increase in adjusted comps. But profits continue to deteriorate, with operating margins slipping under 5% this quarter compared to over 9% last year.
What I'm looking for is continued growth in franchised and dealer-operated stores as a result of continuous improvements in the housing market that drives the need for appliance upgrades. Appliances account for 70% of consolidated revenues at SHO as a whole, but represent almost 80% at Outlet. For all its warts, Sears Holdings remains the recognized leader in this market.
Obviously this is a risky play, so I wouldn't commit a substantial portion of my portfolio to this stock, but as one that's fallen sharply this year and still has an investment thesis surrounding it, I think Sears Hometown & Outlet will surprise in 2015.
Continue Reading Below
Brian Nichols (Advanced Micro Devices): Last Tuesday Bank of America Merrill Lynch held their annual Year Ahead Outlook conference and the message was clear for 2015: Look for where everyone is converged right now, and do the opposite. Candace Browning, head of BofA Merrill Lynch Global Research, added that technology, and specifically semiconductors are a good place to look for investments in 2015. If Bank of America is correct, then investors should be able to find good investments near 52-week lows. AMD is one of those investments.
AMD has had a bad year. The chipmaker's computing and graphics sales, used primarily in PCs, saw a 16% year-over-year decline in sales during its last quarter. Coupled with guidance for a 13% quarter-over-quarter decline in sales during the fourth quarter has led to a near 40% stock loss in the last three months. Further, AMD has announced job cuts to 7% of its workforce and has announced the resignation of its CEO. Yet in spite of all this bad news, gaming console sales have seen a recent surge in demand, which could be good for AMD given the fact that it receives an estimated $100 for every PlayStation 4 and Xbox One console sold -- AMD's chips are used in both consoles.
Given AMD's recent stock losses, combined with the 70% stock losses it has lost over the last five years, the stock might very well have bad news in its PC-related business priced accordingly. One positive about the job cuts is that AMD will be leaner, saving an estimated $85 million in operating expenses. Also, perhaps it's good that AMD will be under new leadership, as the stock has suffered mightily under CEO Rory Read.
All things considered, there's no doubt that AMD has had a bad year, and that's why shares trade at 52-week lows. However, with new leadership, lower operating costs, stable gaming console sales, and a renewed focus on growing its market share in servers, the stock might just have a turnaround in 2015.
Tamara Walsh (lululemon): The upscale yoga and fitness apparel maker just can't seem to catch a break these days. Shares of lululemon athletica are down nearly 20% so far this year and currently trading near the stock's 52-week low. For comparison, the S&P 500 has gained 11% over the same period. However, lulu could finally be headed for a turnaround thanks to fresh initiatives by the company's CEO Laurent Potdevin and increased traction in key segments including men's and youth.
Quality control issues and product recalls (think see-through pants) led to an exodus of investor confidence in lululemon last year. Yet, with Potdevin at the helm since late January, the company has shifted its focus and is in the process of transforming itself into a lifestyle brand. The retailer released its new "Lululemon & Go" apparel line earlier this year to great fan fair. In fact, many of the items sold out online in a matter of hours. The idea behind lulu's "& Go" is to inspire customers to wear its clothes in and out of the gym. This smart strategy could pay off down the road as so-called "athleisure wear" continues to gain mainstream appeal.
Lululemon's menswear business is also gaining traction today. The retailer saw a 9% spike in comparable sales of men's apparel in the first-quarter, followed by a 5% gain in the second quarter. In fact, lululemon is set to open a stand-alone men's store in New York City in the coming months in hopes of capitalizing on the growing popularity of its men's brand. Moreover, the company is optimistic that its men's division can generate $1 billion in annual revenue in the years ahead.
I believe these are strong catalysts for the stock going forward, which is why I'm a buyer even with shares of lululemon currently resting near the low end of the stock's 52-week range.
The article 3 Stocks to Buy Near 52-Week Lows originally appeared on Fool.com.
Brian Nichols has no position in any stocks mentioned. Rich Duprey has no position in any stocks mentioned. Tamara Rutter owns shares of lululemon athletica. The Motley Fool recommends lululemon athletica. The Motley Fool owns shares of Sears Hometown and Outlet Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.