February’s 7 Worst-Performing S&P 500 Stocks to Buy on the Cheap
The S&P 500 lost 2.6% in February. However, on the plus side, the index has gained nearly 5% year-to-date through March 7. So while your first instinct might be to focus on S&P 500 stocks to buy that are on a roll, I’m going with some of the index’s worst-performing stocks from February.
According to MarketWatch, the seven worst-performing sectors experienced declines ranging from -7.6% (energy) to -2.5% (consumer staples) in February.
For this article, I’ll select seven S&P 500 stocks to buy that made MarketWatch’s list of February’s 20 worst performers across most of the seven sectors.
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I’m interested in honing in on seven S&P 500 stocks to buy that backslid in February but mostly have moved higher over the past five years.
Here are my seven S&P 500 stocks to buy that stumbled in February.
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ConocoPhillips (NYSE:COP) lost 15.2% in February, gained 63.5% in 2022, and is up 95.5% over the past five years.
The oil and gas producer hit its lowest point in March 2020. That’s when COP stock traded for less than $27. It’s amazing what an $80 barrel will do for a company’s share price.
Of the 29 analysts covering its stock, 22 rate it “Overweight” or an outright “Buy,” with an average target price of $137.29, 28% higher than where it’s currently trading.
In early February, COP reported Q4 2022 results. The company generated $28.5 billion in cash from operations for the full year, topping the analyst consensus estimate. Its earnings per share for the year were $13.52, more than double the year before.
In 2023, it expects production of 1.78 million barrels of oil equivalent per day (MMBOED), up by 42 MMBOED from 2022. Its total realized price in 2022 was $79.82, 46% higher than in 2021.
Based on the analyst EPS estimate of $11.16, COP trades at just 9.6x its 2023 earnings.
Gen Digital (GEN)
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Gen Digital (NASDAQ:GEN) lost 15.2% in February and 17.5% in 2022 but is up 34.2% over the past five years.
When I saw the name Gen Digital on the list of 20 stocks, it took me a moment to realize this was the name of the former Norton LifeLock. The cybersecurity firm merged with Avast in an $8.1 billion cash and stock transaction in September 2022. As a result, Avast shareholders received $5.97 billion in cash and 94.2 million shares of Norton LifeLock stock.
A few months after the merger closed, the company renamed itself Gen Digital.
The company reported Q3 2022 bookings growth of 35%, excluding currency, to $966 million, its 14th consecutive quarter of growth. In terms of profits, its operating income in the third quarter was $526 million, 48% higher than a year earlier.
The company’s biggest issue is the debt taken to pay for the Avast merger. In April 2022, before the deal’s completion, it had $2.74 billion in long-term debt. At the end of December, it was nearly 4x higher, at $9.83 billion.
That’s a big reason for the stock’s dismal performance over the past year. With a 2.7% dividend yield, get paid to wait for the company to whittle down its debt to a more acceptable level.
Domino’s Pizza (DPZ)
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Domino’s Pizza (NYSE:DPZ) lost 16.7% in February and 38.6% in 2022 but is up 35.0% over the past five years.
In February 2020, people compared Domino’s to Alphabet (NASDAQ:GOOGL) regarding above-average long-term performance. CNBC suggested that if you invested in the pizza chain’s IPO in 2004, you would have achieved a 5,438% return, 85% higher than Alphabet’s return from its 2004 IPO.
In the three years since the article, Alphabet’s stock redeemed itself, outperforming DPZ by 42 percentage points.
As the company’s most recent earnings results show, Domino’s is having difficulties with the delivery segment of its business. Part of the problem is that many of its customers are less inclined to pay delivery fees because of the existing inflationary pressures, a situation that’s affecting a significant segment of its customer base.
To reduce the stresses on its delivery business, it has offered customers lower carryout pizza prices. It’s worked at getting its locations better staffed to deal with the increased carryout business. As a result, it now generates more than 50% of its U.S. sales from carryout.
Trading at 2.52x sales, it hasn’t been this cheap since 2013.
Newmont Corp. (NEM)
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Newmont Corp. (NYSE:NEM) lost 17.6% in February and 23.9% in 2022 but is up 12.70% over the past five years.
Newmont Corporation is one of the world’s leading gold miners, operating in North America, South America, Australia, and Africa.
In 2022, Newmont produced 6.0 million ounces of gold and 1.3 million ounces of gold equivalent (copper, silver, lead, and zinc). It expects 2023 production of between 5.7 million and 6.3 million ounces of gold.
In addition, it has reserves of 96 million gold ounces, leaving it with decades of production.
In 2022, it made approximately $581 per ounce of gold it sold this past year. While that’s down from $726 in 2021, it still generated $1.07 billion in free cash flow after investing $2.7 billion in near-term, cash-generating projects.
The company will pay a base dividend of $1 in 2023 and an incremental dividend between 40 and 80 cents based on gold prices and free cash flow. The March dividend payment is 40 cents. The annual rate of $1.60 is at the midpoint of its guidance for 2023.
It yields 3.8%.
Newmont is trying to reel in Australian gold producer Newcrest Mining (OTCMKTS:NCMGY). It’s offered $17 billion for the company, but Newcrest rejected it. However, it has left open the possibility of Newmont sweetening the deal.
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Moderna (NASDAQ:MRNA) lost 21.2% in February and 29.3% in 2022 but is up a whopping 658.3% over the past five years. At the height of the Covid-19 pandemic, MRNA traded at $450.
Asset manager ClearBridge Investments—it manages nearly $152 billion in assets worldwide—had good things to say about Moderna in its Q4 2022 investor letter for its ClearBridge Select Strategy.
Clearbridge gets paid billions of dollars to analyze these things. So if it’s optimistic that Moderna’s got a post-Covid future, I won’t dispute this possibility.
Analysts are optimistic about Moderna. Of the 21 covering MRNA, 11 rate it “Overweight” or outright “Buy,” with an average target price of $222, much higher than where it’s currently trading. However, one analyst has a “Sell rating with a $93 target.
The risk/reward proposition is tilted in the investor’s favor at the moment.
EOG Resources (EOG)
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EOG Resources (NYSE:EOG) lost 14.5% in February. It gained 45.8% in 2022 and is up 15.0% over the past five years.
A year ago, I wrote an article about 10 S&P 500 stocks to buy that were trading within 5% of their 52-week high. I thought these companies would keep moving higher through 2022 and into 2023. EOG was one of the 10 names.
From November 2020 through June 2022, EOG stock went on a 316% run. It went on a second run in 2022, gaining 41% over six weeks in late September through early November. It’s been pretty much downhill ever since.
I like its capital allocation strategy, paying out $2.7 billion of its free cash flow in 2021 for share repurchases, regular dividends, and a $1 special dividend. In 2022, it generated $7.65 billion in free cash flow, returning $5.27 billion to shareholders.
That included four special dividends totaling $5.80. It will pay another special dividend at the end of March.
You don’t get much more special than special dividends.
VF Corp. (VFC)
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VF Corp. (NYSE:VFC) lost 19.8% in February, 62.3% in 2022, and 67.0% over the past five years.
In December, Steve Rendle stepped down as CEO of the company after nearly six years in the top job and 25 with VF. Board member Benno Dorer stepped in as interim CEO while the board searched for Rendle’s replacement. This is an important decision for the company, so it will probably take a while.
The company’s iconic brands include The North Face, Vans, Timberland, Supreme, and Dickies. There are several examples of holding companies that have successfully pieced together a group of apparel businesses and been very successful. LVMH (OTCMKTS:LVMUY) and Tapestry (NYSE:TPR) come to mind.
In February, VF reaffirmed its fiscal 2023 (March year-end) full-year guidance of 3% revenue growth and adjusted earnings per share of $2.10 at the midpoint of its outlook. For fiscal 2024, it expects at least revenue growth in the low-single-digits and double-digit growth in operating earnings.
When VF stock hit its all-time high of $100.25 in January 2020, investors valued it at 3.12x sales. Today, the company’s stock can be had for nearly one-quarter that multiple.
It might have problems, but those will get sorted out when the new CEO comes in. So if you want to wait until the announcement, that’s not a bad move, but put it on your watch list because it’s not a $25 stock.
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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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